Insurers should be accountable for unfairly denying claims, group argues

Jan. 1, 2020
Insurance policyholders whose legitimate insurance claims were low-balled, delayed or denied by their insurance companies testified before the D.C. Council June 25 in support of legislation that would allow consumers to hold their insurer accountable

Insurance policyholders whose legitimate insurance claims were low-balled, delayed or denied by their insurance companies testified before the D.C. Council June 25 in support of legislation that would allow consumers to hold their insurer accountable in court.

Consumer Watchdog joined policyholders, advocacy organizations and attorneys for insurance consumers to call on the committee on Public Services and Consumer Affairs to forward legislation to the full council.

Under current District law, individual consumers cannot take their insurer to court for failing to fairly pay a claim. The lack of legal accountability gives insurance companies a financial incentive to make unfairly low settlement offers, and intentionally delay or deny legitimate claims, because they can only be required to pay policyholders the original value of the claim.

“I have to pay my premium on time and in full and my insurer should have the same responsibility,” says Carmen Balber, Washington, D.C. director for the nonprofit Consumer Watchdog. “Instead, District law lets insurance companies off the hook for unfairly low-balling claims, dragging their feet on payment, or denying a legitimate claim altogether. The law must change to protect consumers from those insurers who otherwise may be more focused on profits than policyholders.”

Washington, D.C. auto insurance premiums were the highest in the nation in 2007, according to Consumer Watchdog. The District was the 2nd-most profitable jurisdiction in the nation (second only to Hawaii), with average profits of 14.9 percent between 1997 and 2006. (See the April 2008 study by the Consumer Federation of America: http://www.consumerfed.org/pdfs/state_auto_insurance_report.pdf)

“As policymakers whose job it is to protect District consumers, you can be secure in the knowledge that insurers are making high enough profits and collecting enough in premiums from District drivers to have plenty of room to pay claims more fairly without an increase in premiums,” Balber testified.

Consumer Watchdog said it studied the effects of consumer access to the courts on auto insurance claim settlements and frequency. A 1988 court ruling in California changed that state's law and provided an opportunity to study the impact on claims payment of consumers' access to the courts before and after that right was eliminated. The study examined automobile insurance claim trends over the 10-year period following the change in law and concluded that, during the period after motorists lost recourse to the courts, claim settlements were significantly reduced in value and in frequency, and profits for insurers increased.

Download Consumer Watchdog's letter to the Committee here: http://www.consumerwatchdog.org/resources/LtrDCBadFaith6-3-09.pdf

Download the study, “The Low-Balling of the California Auto Insurance Claim,” at: http://www.consumerwatchdog.org/documents/1743.pdf.

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