Market Conduct Studies—Complaints Matter, But the Question Is How Much?
Policyholders, insurance restoration contractors, and public adjusters should liberally file consumer complaints regarding frustrations and complaints they have with state insurance commissioners. While some academic studies suggest that the statistical probability of such complaints generating a market conduct claim study will take place, my belief is that this is because there are not enough complaints being filed and filed in a manner that brings the complaint to a pivotal position that the regulator and insurer have to be afraid of not responding.
Yesterday’s post, “Do Market Conduct Claims Studies Effectively Regulate Wrongful Insurance Company Claims Practices?” highlighted that insurance regulators fail to regulate insurance company claims misconduct for many reasons. One reason is that policyholders do not fully understand what to complain about because most do not understand insurance company obligations and the claim process, as noted by insurance law professor Jay Feinman:1
Nor are consumers likely to have sufficient experience of their own with claim practices to assess the quality of a company’s performance. Most insureds never suffer a loss, few insureds suffer more than one, and even fewer suffer a substantial loss. Even including the experience of acquaintances, consumers do not have an adequate base of experience to assess a company’s claim practices, much less to compare it to a competitor’s practices.
Moreover, even if a loss occurs and the claim process does not fully compensate the insured, the information inequality between a company and its policyholder produces situations in which the policyholder may not be able to evaluate adequately the company’s performance in the claim process. If a policyholder does not receive all that he or she expects in terms of payment or service during the claim process, the policyholder must identify the shortfall as the fault of the company, rather than take it as simply an unfortunate event.11 Because of the policyholder’s lack of expertise in understanding the insurance policy, its interpretation, and the technical aspects of the damages and its consequences, he or she is likely to accept the insurer’s explanation for the limits on coverage as correct even if it is not.
Professor Feinman also noted that many wrongful claims conduct complaints are not addressed by regulators simply because they are too busy or the policyholder may have hired an attorney or litigation was commenced:
[A]s a structural matter there is reason to doubt the efficacy of the complaint mechanism in enforcing claim practices standards. The caseloads of employees who process complaints often preclude extensive involvement. One survey reports that in fifteen states complaint handlers have caseloads of 600 cases or more, and in seven states of 1000 or more. The result of such overload is predictable: nearly half of the states are unable to process all the consumer complaints they receive. Regulators often refuse to address complaints in which there is an unresolved legal or factual issue, which certainly constitutes a large portion of the complaints, both because such cases are resource intensive and because departments often consider the resolution of such issues beyond their authority. If the complaints are serious, they may warrant litigation and regulators then defer investigation.
I suggest policyholders, restoration contractors, and public adjusters professionally, effectively, and liberally write more complaints to the various state insurance commissioners and copy the executive directors of the insurance company and state legislators about the issues of delay and non-payment. If the complaint is legitimate, the more that know or are aware of the problem, the greater the likelihood of those in power doing something to correct the situation, as well as looking into the possibility of a systematic wrongful claims practice by the insurer’s claims department.
Claims delay, denial, and underpayment are the most common complaints filed by policyholders, as I noted long ago in Claim Delay, Claim DeniaI, and Underpayment Issues Dominate Consumer Complaints About Insurers. At the same time, I have been in department of insurance meetings where well meaning staff regulators have told me that they have few, if any, complaints about common topics raised by public adjusters or restoration contractors, knowing that policyholders might not be experts about the wrongful claims issue. The bottom line is that policyholders, restoration contractors, and public adjusters should file more complaints and be more specific about the exact issue causing the delay, denial, or underpayment.
The complaints should be backed up by facts and distrusted to as large a population as possible to prevent some from thinking they can dismiss the issues without a critical response.
Thought For The Day
Thank your customer for complaining and mean it. Most will never bother to complain. They’ll just walk away.
—Marilyn Suttle
1 Jay M. Feinman, The Regulation of Insurance Claim Practices, 5 U.C. Irvine L. Rev. 1319 (2015). Available at: https://scholarship.law.uci.edu/ucilr/vol5/iss6/4
