Cyrus Dugger

From the Kansas City Star, a special series looking into insurance complaints nationwide

Here’s an interesting series on insurance.

About the series: Methodology

The Kansas City Star used a computer program this year to obtain nearly 35 million records about consumer complaints from the public Web site of the National Association of Insurance Commissioners.
The Kansas City-based association receives complaint information from the states and presents the information on its Web site to inform consumers.
The Star analyzed records about complaints and premiums for 2,400 companies, reasons for consumer complaints, complaints by type of insurance and state regulators’ decisions.

The first installment…

Only wreckage remains when insurance agents breach trust

Only wreckage remains when insurance agents breach trust You think you’re covered? You might be surprised, and at the worst possible time. By MARK MORRIS The Kansas City Star

After an accident at work that could have killed him, Gary Davis of De Soto discovered that he had purchased bogus health insurance policies for his auto repair shop from an agent who shouldn’t have been licensed.

After she turned 94 years old, Lina Dickerson of St. Louis realized her agent had duped her out of her life’s savings as a teacher.

And after her van crashed, single mother Donalda Martinez of Garden City, Kan., learned she had no coverage because her agent had put her premiums in his pockets.

Unfortunately, thousands of Americans are victimized just like Davis, Dickerson and Martinez. Insurance agent misconduct and fraud is widespread and getting worse, according to experts interviewed by The Kansas City Star.

Among the most common abuses: agents who steal a client’s premiums by failing to forward them to the insurance company. Bad agents also sell unlicensed products or coverage that is unsuitable. And some are just crooks, no better than a policyholder who commits insurance fraud.

“A disturbing and growing number (of agents) won’t hesitate to bilk their own clients in order to pad their own lifestyle or bail out an agency that’s in trouble,” said James Quiggle, a spokesman for the Coalition Against Insurance Fraud, a nationwide advocacy group supported by insurance companies, regulators and consumer groups. “It’s a front-and-center problem for regulators all over the country.”

To be sure, most agents are honest, according to experts who have studied the insurance industry.

“The great majority are highly competent and ethical agents,” said Jerry Todd, a risk management professor at St. Mary’s University in San Antonio, “but consumers need to be aware of the potential for fraud and deal with reputable, professional agents they can trust.”

But criminal background checks for agents are spotty. Kansas performs them only when a prospective agent files for a license, not on renewals. Missouri never checks.

And not all states require insurance companies to report agent fraud to authorities when they do find it. Kansas and 10 other states have no fraud reporting requirements at all, according to the Coalition Against Insurance Fraud. At least nine other states, Missouri among them, require reporting only when a customer files a fraudulent claim.

As a result, finding statistics on agent fraud is nearly impossible.

The Star’s database analysis of millions of insurance records, first reported Sunday, found that consumers filed 9,718 complaints with state regulators between 2003 and 2005 specifically about how their agents handled policies or premiums. However, the data collected by the National Association of Insurance Commissioners, based in Kansas City, fail to disclose how many of those complaints directly involved fraud.

“There are no significant data or formal studies on the subject and virtually nothing in journals of either academicians or insurance professionals,” according to a 2000 study published by four university professors in Texas.

Six years later, the Insurance Information Institute — the industry’s statistical clearinghouse — says it also has no reliable information on bad agents.

But The Star found in interviews that agent fraud is on the upswing, possibly because of a flood of new agents. In the last five years alone, the number of agents selling insurance increased by 58,640, according to federal labor statistics. (link)

Posted at 10:12 AM, Dec 15, 2006 in Permalink | Comments (0) | TrackBack (0)