|Insurance Department and Farmers Complaint Record
Insurance Dept. Revamping to Better Handle
After years of neglect, angry consumers are finally being heard at
the state Department of Insurance.
The department is making it easier to file a grievance
against an insurer and is hiring more people to handle the complaints. Moreover, the
department's Web site has been redesigned with consumers in mind, and its annual complaint
survey has been prominently posted.
Consumer protection "is a very important role that I
want to see accomplished," said Insurance Commissioner Harry Low, who was appointed
in September after former Commissioner Chuck Quackenbush resigned in a scandal. "It
wasn't being given the kind of attention [under Quackenbush] that I want to give it."
The question remains whether this attention will result in
tighter regulation, more actual investigations and better service for Californians. But
consumer advocates are encouraged by these signs of life in a long-neglected division of
the regulatory agency.
"This is obviously a major reversal from the
Quackenbush years," said Harvey Rosenfield, head of Santa Monica-based Foundation for
Taxpayer and Consumer Rights. "The single biggest problem people have with insurance
is when companies don't pay their claims fairly, and the new insurance commissioner is
stepping up to the plate to offer more help and resources to people who are having
Quackenbush resigned last year after The Times revealed he
had reached secret agreements with insurers accused of mishandling earthquake claims and
had used money from the settlements to benefit himself politically.
Among the changes consumers can see in the department:
* The complaint process has been revamped to be faster and
less cumbersome. Instead of requiring consumers to use a mail-in form, the department put
the document online so irate consumers can fire off their complaints via the Internet. The
agency's Web site at http://www.insurance.ca.gov has been redesigned to make it easier to
find the complaint form, premium surveys and other information to help consumers with
* The department hired 15 new consumer telephone hotline
operators, bringing its staff to 52, and hopes to further expand its hotline hours beyond
the current 8 a.m. to 6 p.m. weekday schedule. The hotline number is (800) 927-HELP or
* Last year, the Legislature approved funding to add more
investigators to the department's fraud and investigations division. The department plans
to add 114 investigators to supplement the 318 positions already on staff, said Deputy
Commissioner Scott Edelen.
The department recently posted its annual consumer complaint
survey for the 50 largest auto, homeowner and life insurance companies--surveys that have
long been controversial with both insurers and consumer advocates.
Quackenbush suspended an earlier version of the survey after
taking office in 1995 because insurers said it didn't distinguish legitimate from
frivolous complaints and didn't take into account how many policies a company had written.
In 1998, the Legislature passed a law that helped define
which complaints would be classified as "justified"--when regulators determined
the insurer had violated state laws, rate filings or their own policy language--and how
those justified complaints would be used to rank insurers. Quackenbush published a new
version of the survey in 1998.
Consumer advocates complained then--and still do--that the
department was finding too few complaints to be justified. Instead, most complaints were
ruled either "questions of fact"--when the investigator couldn't determine who
was right--or placed in a third category for complaints that were determined to be neither
justified nor a question of fact.
For example, the department fielded 6,130 auto insurance
complaints in 1999 about insurers that wrote a total of 17.3 million policies.
Investigators determined that 702 complaints, or 12%, were justified. Another 35% were
deemed "questions of fact," with more than half relegated to the third category.
"I wouldn't expect half of the complaints to be
frivolous," said Gail Hillebrand, an attorney for Consumers Union in San Francisco.
"It's a lot of trouble to complain, and people usually don't make the effort unless
there's a real problem."
Auto insurers attracted the most complaints. The department
said 1,449 complaints arose from the state's 7.4 million homeowners' policies and 625 came
from 6.9 million life insurance policies.
Edelen said the complaints include gripes about confusing
policies, unresponsive companies and slow claims handling.
Companies that specialize in bad drivers tended to rank at
the bottom of the auto insurance complaint survey. Superior Insurance Co., for example,
had 45 justified complaints per 100,000 policies.
The two companies at the top of the auto list, USAA Casualty
Insurance Co. and Wawanesa Mutual Insurance Co., had no justified complaints in 1999.
Neither are major players in the California market.
State Farm, the state's largest auto insurer, was the
highest ranked among California's major insurers with 1.8 justified complaints per 100,000
policies. Farmers Insurance, the No. 2 auto insurer, was last among the seven biggest
insurers with six justified complaints per 100,000 policies.
Jerry Carnahan, state director for Farmers' California
insurance business, said the company recognized that it had a problem with unhappy
customers and has recently revamped its claims process so that problems can be quickly
Auto Complaint Survey
This is how the state's largest auto insurers ranked in the
California Department of Insurance's latest consumer complaint survey. Figures are for
1999. The full survey is available at http://www.insurance.ca.gov/docs/FS-Complaint
of Justified Complaint
policies complaints* ratio**
Mercury Insurance 1.0 million
* Complaints in which regulators determined that the insurer
violated state laws, rate filings or its own insurance policies
** Number of justified complaints per 100,000 policies or
Source: California Department of Insurance