Insurance Dept. Revamping to Better Handle Complaints

    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 problems."
     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 problems.
     * 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 (213) 897-8921.
     * 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 settled.

     
     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 Study.htm.

                                    No. of     Justified   Complaint
   Company                       California policies   complaints*     ratio**
   State Farm                     2.8 million            51          1.8
   Mercury Insurance        1.0 million             20          2.0
   CSAA                              1.9 million            39          2.1
   Auto Club                        1.5 million            32          2.1
   21st Century                  1.1 million            24          2.1
   Allstate                            1.7 million            62          3.6
   Farmers                           2.3 million           136          6.0

     * 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 covered autos
     Source: California Department of Insurance