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Insurance market conduct: Claims handling is biggest problem 2

Sat Oct 6th, 2012 on     Homeowners Insurance,    

Usually the “best” and “worst” lists come out closer to the end of the year. For insurance companies, though, the season came a little early this year. Researchers looked at market conduct reports filed in 2012 and came up with the most common complaints that regulators like Florida’s Office of Insurance Regulation had about insurance companies’ processes.

In our last post, we reviewed the five most commonly reported problem areas in property and casualty companies across the nation. At the top of the list was claims handling, a finding that, sadly, consumers are all too familiar with.

The next five items — the complaints that rounded out the study’s Top Ten List — may not be news to consumers either. In eighth place, for example, was companies’ failure to work with licensed and appointed insurance agents and brokers. Along with that, regulators found that the companies were not notifying state insurance departments of changes in their agent and broker rosters.

When we say that insurance is highly regulated, we mean all of the insurance business. Selling insurance or representing an insurance company to individuals or businesses is a highly technical job. Producers, to use the industry term, must pass tests to obtain a license and in some states, though not Florida, they must attend continuing education programs in order to maintain their licenses. The requirements vary by state, and insurance departments pay attention — as do law enforcement agencies, because selling insurance without a license is a felony in Florida.

Regulators look at the insurance agent’s license status as well as the relationship between the agent and the insurer. An insurance company must “appoint” an agent to sell its products. The company doesn’t have to hire the agent but must establish a formal relationship with that person that gives that person the authority to sell the insurer’s coverage.

While it may sound like busy work for the insurance company to notify the state insurance department of appointments and ended relationships, that notification is a way for the state to protect consumers. If an agent is selling Homeowners Company A’s policies but hasn’t the authority to do so, the insurance company could deny any claims filed by those policyholders.

We’ll continue this in our next post.

Source: Insurance News Net, “Consumer Criticism No. 1: Failure To Pay Claims Properly,” Sept. 27, 2012

We help homeowners who have had problems with insurance companies and producers who may have violated rules like the ones discussed above. If you would like to know more about our Miami, Florida, practice, please visit our homeowners insurance claims page.

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