State Revives Insurer Complaint Survey
California consumers once again have a way to measure how badly--or well--their insurance company handles claims.
After years of delay and agitation by consumer advocates, the California Department of Insurance on Thursday resurrected its consumer complaint survey in a new form that ranks insurers by the number of “justified” complaints for every 100,000 policies written. The study covers complaints settled in the first six months of this year.
The new survey--the first since 1994--is an attempt to mollify insurers who argued that previous reports failed to distinguish spurious from legitimate complaints and did not properly reflect a company’s exposure, or the number of policies written in the state.
But the revised effort got mixed reviews from consumer groups, who say the rankings don’t give policyholders the information they really need to evaluate their insurers.
“It’s nice to see they are trying, but I don’t always trust the Department of Insurance to say what’s justified and what’s not,” said Linda Sherry, spokeswoman for Consumer Action in San Francisco. Sherry said the total number of complaints was a better guide in determining which consumers were unhappy with their insurers.
The survey is the first published since Commissioner Chuck Quackenbush, who is up for reelection Tuesday, took office in 1995.
The report has been mired in legal and political wrangling as regulators tried to determine standards for which complaints should count against an insurer.
In conducting the six-month survey, the Insurance Department used legislation that took effect in March to help define which complaints would be classified as justified--that is, how often regulators determined that the insurer had violated state laws, rate filings or their own insurance policies--and which would be classified as unjustified.
A third category of complaints involved questions of fact that insurance investigators were unable to settle. Some of these would have to be settled in court, the department said.
Consumer advocate Gail Hillebrand said questions-of-fact complaints should have been included in the complaint ratio, since insurers have the burden of being clear when writing insurance.
“If they don’t know if it’s justified or not, it should count against the company,” Hillebrand said.
California State Automobile Assn. and Mercury Insurance, for example, had about the same number of justified complaints, Hillebrand said. But Mercury had 253 total complaints, including 83 question-of-fact complaints, for 901,000 auto policies, while CSAA had 149 total complaints, including 40 question-of-fact concerns, for nearly 2 million policies.
Not surprisingly, auto insurers that specialize in covering bad drivers generated the worst ratios of justified complaints, while company restructuring and leftover earthquake claims contributed to high complaint ratios for divisions of some of the state’s largest insurers.
The auto insurers with the fewest complaints for the number of policies written included Wawanesa Mutual, American Economy, 21st Century Casualty and California Casualty Indemnity Exchange. State Farm Mutual Auto, the state’s largest auto insurer with 2.8 million policies, ranked eighth out of 50 companies surveyed.
At the other end of the list, nonstandard insurers, such as TIG Specialty, Superior and Sterling Casualty, were rated the worst for justified complaints. Nonstandard insurers cover motorists who have too many tickets or accidents on their records to qualify for regular insurance.
“These companies have higher-risk drivers, more accidents, more claims,” said Brian Sullivan, an independent analyst in Laguna Niguel and publisher of Auto Insurance Report, which tracks industry trends. That means more complaints, too, he said.
Top among homeowners insurers were USAA, Associated Indemnity Corp. and TIG. State Farm, California’s largest homeowners insurer with 1.3 million policies, ranked 21st out of 50 insurers measured, while No. 2 company Farmers ranked 33rd. But smaller divisions of the same companies ranked worse.
Farmers Insurance Exchange and State Farm Fire & Casualty, two small divisions of their corporate giant parents, ranked near the bottom of the homeowners list, as did 20th Century. The smaller Farmers unit insures older homes likely to get more claims, a spokeswoman said, while the smaller State Farm unit is being phased out.
State Farm spokesman Bill Sirola speculated that both divisions of his company had higher-than-normal complaint ratios because of the transition. “Legally, we had to send all of our State Farm Fire & Casualty customers a non-renewal notice” before transferring them, Sirola said. The notices caused consternation among many longtime policyholders, even though their coverage continued in force.
Sullivan said the study was useful at its extremes. “I would look at the guys at the very top of the list and the guys at the bottom of the list,” Sullivan said. “The stuff in the middle doesn’t mean as much.”
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Damage Control
The five largest California home and auto insurance companies, ranked by the number of justified complaints per 100,000 policies or covered automobiles, as determined by the state’s insurance department. The second column is all complaints as a percentage of policies or autos, which some consumer advocates say is a better measure.
Homeowners Insurance
Rank: 1
Company: CSAA
Justified complaint ration: 0.4
Justified complaints: 1
*
Rank: 2
Company: State Farm
Justified complaint ration: 0.5
Justified complaints: 6
*
Rank: 3
Company: Safeco
Justified complaint ration: 0.9
Justified complaints: 2
*
Rank: 4
Company: Allstate
Justified complaint ration: 1.3
Justified complaints: 14
*
Rank: 5
Company: Farmers
Justified complaint ration: 3.2
Justified complaints: 42
Automobile Insurance
Rank: 1
Company: CSAA
Justified complaint ration: 0.8
Justified complaints: 16
*
Rank: 2
Company: State Farm
Justified complaint ration: 1.1
Justified complaints: 32
*
Rank: 3
Company: 20th Century
Justified complaint ration: 1.4
Justified complaints: 14
*
Rank: 4
Company: Auto Club (AAA)
Justified complaint ration: 2.4
Justified complaints: 31
*
Rank: 4
Company: Farmers
Justified complaint ration: 2.4
Justified complaints: 56
*
*Source: California Dept. of Insurance. A more comprehensive list is on C4. The complete list of the 50 largest companies in each category can be found at https://www.insurance.ca.gov/docs/Idconsum.htm
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How to File a Complaint
If you can’t work out an auto, homeowners or life insurance problem with your agent or the company, you can lodge a complaint with the state Department of Insurance at (800) 927-HELP (for those outside the 213 area code) or (213) 897-8921. A form is also available through its Web site, https://www.insurance.ca.gov/docs/Idconsum.htm.
Consumer groups such as Consumers Action, (415) 777-9648, may offer assistance. You could also hire a public adjuster or an attorney.
