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Texas drivers hit roadblocks after filing auto insurance claims
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AUSTIN — Pat Taylor of Mesquite was headed home after a typical workday this summer when another car jolted her Toyota Highlander from behind.
The damage to her SUV was serious and, she said, the 20-year-old driving the other car clearly was at fault. Police arrived and the other driver showed an insurance card from a company that Taylor figured would cover her losses, estimated at $1,500.
But after several days, she said, the other driver’s insurer — Fred Loya Insurance Co. — told her that the policy was in his mother’s name and that he was excluded from coverage, and that the company would not pay for the damages.
“It was infuriating,” she said of the accident along U.S. Highway 80. The insurance card from Loya “let him get his annual inspections and license renewals. But when he got into an accident, all of a sudden he had no insurance coverage.”
Taylor’s case is not an isolated example for drivers in North Texas and across the state after accidents involving Loya or Old American County Mutual Insurance — two major companies at the top of the state’s complaint list for auto insurers.
The Texas Department of Insurance says Loya, which collected $271 million in premiums last year, had a “complaint index” of 2.4, nearly 21/2times the state average. The larger Old American, which had premiums of $575 million, had a complaint index of 3.96 — nearly four times the state average.
The department is investigating both companies. As for Old American, the agency has accused it of arbitrarily canceling hundreds of auto policies after customers were involved in accidents.
Loya declined to comment. A spokeswoman for Dallas-based Old American said it could not discuss the investigation but said it is making improvements.
“Our complaint count in previous years clearly needed improvement, and that’s why everyone in our organization and our managing general agents have invested significant time and resources in ensuring our customers are receiving the service they deserve,” said April Findley, executive vice president for Old American.
She cited a 23 percent drop in gross complaints against the company in the third quarter this year.
A The Dallas Morning News analysis of the Insurance Department’s consumer complaint figures showed that 11 of the 25 largest auto insurers in the state — those with more than 100,000 policies — had a complaint index that was above average last year.
Kenny Lee Harrison of Rockwall was among those who complained. He said his 1999 Ford Mustang was badly damaged last year by metal rods that blew out of a car on the highway and landed under his vehicle, ruining his transmission. The other driver acknowledged fault and told Harrison his insurer was Old American.
The company initially told him it would pay for a rental car while Harrison’s Mustang was being repaired. Then two months went by, he said, with no repairs and Old American doing nothing, saying they could not reach the policyholder.
“I finally decided to search for him myself and went to his house. I had him call his insurer and they said they would get back to me. Two weeks later, they said they were going to total the car and send me a check for $3,500, but they refused to pay the $1,000 I had to spend for the rental car so I could get to work,” he said.
Harrison’s complaint is pending.
“It was a pretty terrible experience. This is why people think insurance companies are some of the biggest crooks around,” he said.
Taylor, the Mesquite driver, said her insurance company is trying to collect from the man who hit her.
“I get calls about this all the time,” he said. “There are a few companies that have been a source of continuing problems, as far as paying claims where there is no issue of who’s at fault. There is not a whole lot the average person can do.”
Typically, Smithee said, an adjuster for the company tells the injured party that if the claim isn’t paid, the person will have to hire a lawyer and will probably wind up with little money for the trouble. At that point, the driver feels forced to take 50 percent or less of the claim for damages.
“It has been hard to make some of these companies behave,” he said.
Smithee said he is considering measures to deal with the problem in the next legislative session. One idea he has floated in the past would require mandatory arbitration when a company refuses to pay a legitimate claim.
Unethical firms’ advantage
Last year, consumers filed more than 6,600 complaints against auto insurers in Texas. More than half were filed by drivers who said they were not at fault in an accident but had trouble getting an insurer to pay their claims.
Alex Winslow of Texas Watch, a consumer group active in insurance issues, said unethical companies have an advantage because they undercut regular insurers on price largely because of the claims payment practices.
“The business model is they drag their feet and make it as difficult as possible for the claimant to collect in hopes they will take a low-ball offer or give up,” he said.
“I’m concerned the Insurance Department is not being aggressive in policing market conduct. They should be exercising more authority over these companies that are using questionable practices.”
An Insurance Department spokesman said he could not comment on possible Loya violations under investigation. But he noted that the agency has filed specific allegations against Old American with the State Office of Administrative Hearings, the first step in a process to determine whether the company faces fines or other penalties.
The department alleged that Old American illegally rescinded hundreds of auto policies between 2005 and 2009 after claims were filed against the company on those policies. Old American has denied any wrongdoing.
AT A GLANCE: Complaints filed with state
These Texas insurers had an above-average number of complaints in 2010, based on Insurance Department complaint index*:
AAA Texas County Mutual 2.06
ACCC Insurance 1.28
Allstate Fire and Casualty 1.16
Allstate Indemnity 1.29
Colonial County Mutual 1.64
Geico Indemnity 1.36
Home State County Mutual 1.58
Liberty County Mutual 1.33
Fred Loya Insurance 2.4
Old American County Mutual 3.96
Southern County Mutual 1.95
*The average index for all companies is 1.0; a higher number would indicate the insurer has more complaints than average filed with the state. A company with an index of 3.0 has three times as many complaints as the typical company. Eleven of 25 insurers with more than 100,000 policies in Texas had an above-average complaint index.
WHAT CONSUMERS COMPLAINED ABOUT
Delays in handling claims 36.7%
Unsatisfactory offers 21.8%
Denial of claims 16.3%
Note: Figures reflect complaints in the third quarter of 2011.
SOURCE: Texas Department of Insurance
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