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Dead End Delays: More Consumers
are Filing Complaints with TDI About Auto Insurance Claims Delays, but
Will It Help Them?
Courtesy of Texas Watch Online
12/12/01
In April an Austin area man and his pregnant
wife were injured in an auto accident caused by another driver. After
three weeks of rude treatment, run-arounds and delays from the at-fault
driver’s insurance company, the couple filed a complaint with the
Texas Department of Insurance. With no action after the complaint, they
were forced to file with their own insurance company to repair the car
damage. Seven months after the accident, they still have not received
payment for medical expenses or lost wages and the Texas Department of
Insurance has closed their file on the complaint with no action.
When consumers face classic run-around, delay and bullying tactics from
Texas insurers, consumers have few resources to which to turn for
assistance. Filing a report with the Texas Department of Insurance (TDI)
is often the last resort for frustrated citizens who have been treated
unfairly by insurance companies, but just how effective is TDI’s
complaint system at helping to resolve claims? Does TDI have the
authority and ability to advocate for consumers or hold irresponsible
insurance companies accountable? If not, what options do consumers have?
In an effort to address these questions, Texas Watch recently conducted
a study of auto liability insurance complaints filed at TDI between 1996
and 2000. The study analyzed TDI complaint statistics and reviewed
complaint files received through an open records request. The study
indicates a significant rise in the number of complaints filed by Texas
drivers against auto insurers and the ineffectiveness of the TDI
complaint process to resolve consumer complaints.
Trends in Auto Insurance Complaints Made to TDI
Texas Watch examined trends in auto insurance complaints from 1996 to
2000 based on TDI complaint filing records. Delays in handling claims
ranked as the top complaint every year from 1996 to 2000. Other frequent
complaints included denial of claims and unsatisfactory settlement
offers.
-There were 14,082 complaints filed against Texas auto insurers in 2000,
up from 10,847 complaints filed in 1996.
-Delays in claims handling accounted for 36% of all auto insurance
complaints filed in 2000 and 49% of complaints filed by 3rd parties
(drivers who were not at fault).
-There was a 27% increase in the number of delayed handling complaints
from 1999 to 2000, while there was a 9% decrease in number of total
complaints.
As fewer consumers found reasons to complain about excessive rates and
customer service between 1999 and 2000, more consumers were compelled to
complain about delays in claims handling. The data suggests that while
insurance companies may have practiced better claims handling overall
last year, they are delaying substantially more claims.
A Close Look at How 3rd Party Auto Complaints are
Handled
Texas Watch also performed a detailed, case-by-case review of 331
third-party (driver who is not at fault) auto liability complaints filed
in the second quarter of 2001 involving delays in claims handling. This
in-depth study allowed for an evaluation of the actions taken by TDI
when complaints are filed and provided insight into the specific causes
of complaints.
The TDI Complaint Process and Its Effectiveness
Upon receipt of a complaint, TDI sends a written acknowledgment to the
complainant and notifies the insurance company of the complaint. The
insurance company is given ten days to respond to TDI and that response
is then forwarded to the complainant with any recommendations from TDI.
TDI does not guarantee that participating in this complaint process will
resolve the claim in question. Our study found that this process was
followed consistently.
-Claims were fully resolved in only 34% of the cases examined. Claims
were partially resolved 13% of the time and 53% of the cases were still
unresolved when TDI closed their file on the complaint.
-In 63% of studied cases TDI did not provide any recommendation as to
how to resolve the claim. In 19% of cases TDI recommended contacting an
attorney if the complainant wished to pursue the claim.
-TDI took some action on behalf of the complainant only 15 times in the
331 cases examined. In 95% of studied cases, TDI simply acted as a
go-between for correspondence.
What is Causing the Delays?
-22% of delays resulted from an insurance company’s failure or
inability to contact their policyholder. In some cases, this caused
delays for several months.
-15% of delays resulted from clerical errors made by the insurance
agency, including sending the settlement check to the wrong address,
misplacing files, and making a settlement check out to the wrong name.
-13% of delays resulted from a dispute over who was responsible for
causing the accident.
-12% of delays resulted from an insurance company offering a settlement
that was deemed unfair or incomplete by the complainant.
What Does This Mean for Consumers?
Our research shows that every year more people turn to TDI to look for
help with their delayed claims. With apparently limited authority to
correct actions or behavior, TDI seems to be ineffective at achieving
resolutions for complainants. This study indicates that consumers need
more tools with which to advocate their case and a stronger authority to
which they can turn to hold insurance companies accountable for paying
legitimate claims.
In the face of classic delay tactics, consumers find little recourse or
remedy from TDI and have few alternatives. Many of the individuals who
have filed complaints were forced to pay damages out of their own
pocket, turn to their own insurance companies or forgo repairs
altogether.
How Texas Watch is Helping
During the last two legislative sessions, Texas Watch has supported
bills designed to bring fairness to the insurance claims process. Dozens
of Texas Watch members from across the state who have experienced
abusive insurance tactics first hand came to the capitol to lobby and
testify in favor of these bills which called for:
-Requiring insurance companies to provide complete and truthful
information to consumers during the claims process.
-Prohibiting insurance companies from distributing misleading and
deceptive communications.
-Creating a 30-day period following a claims settlement in which Texans
could opt out of a unfair settlement if they were tricked or pressured
into it.
-Increasing access and availability to insurance for Texas families.
-Controlling the rise in insurance costs.
How You Can Make a Difference
Texas Watch will continue to support legislation designed to level the
playing field between insurance companies and Texas families by giving
consumers more tools, information and power. To help reform the
insurance industry, you can share your story of insurance abuse, contact
your legislators before important votes or testify in favor of
beneficial legislation. You can find out how to participate at
www.texaswatch.org. To get involved, you can also call Stacey toll-free
at 1-888-738-4226.
Insurance Company Accountability
Network (ICAN)
ICAN works to eliminate abusive and unfair behavior within the
insurance marketplace. ICAN works to educate and involve consumers in
the legislative and regulatory processes that impact the cost of
insurance and the legal rights of insurance consumers. ICAN educates and
empowers Texas families to protect themselves in the insurance
marketplace through a better understanding of the system and increased
awareness of insurance company abuse.
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