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Ensuring insurers back up their claims

For all the assurances of being in good hands, finding a good neighbor, of having rock-solid support in challenging times, consumers filing insurance claims can end up feeling quite alone. -- By Gayle B. Ronan
John "Jack" Howard hauls out a wheelbarrow of rotten building materials from his home damaged by Hurricane Katrina in Chalmette, La., last month. According to a recent survey, two-thirds of insurance policyholders are uncertain about the details of their coverage.Rogelio Solis / AP
/ Source: contributor

For all the assurances of being in good hands, finding a good neighbor, or having rock-solid support in challenging times, consumers filing insurance claims can end up feeling quite alone.

Postings to sites like and confirm disappointment with insurance companies abounds.

Also airing consumer complaints are each state’s department of insurance. Their Web sites can be accessed through the National Association of Insurance Commissioners (NAIC) Web site. While these complaint files make far less colorful reading, the state-compiled data can actually save consumers from potential aggravation.

“Knowledge is your best policy when it comes to insurance,” advises Scott Holeman, the spokesperson for NAIC. According to Holeman, state insurance departments are the ultimate sources for that knowledge: “They are an objective source of information for helping consumers understand what coverage they need and what they should expect from their policies and providers.” The commissioners’ offices also understand what type of coverage the people living in their states need, especially when it comes to auto and property insurance.

The state agencies can also help consumers verify an insurer’s legitimacy. 

Fake insurance policies, especially health care policies, have been a problem in recent years according to the NAIC.  It advises consumers to “Stop, call and confirm” before buying any insurance. Specifically, they suggest verifying a policy before signing any documents or checks. A call to the state insurance department will confirm the company and the agent are legit and licensed to do business in the state.

Such verification is an important defense to avoid becoming a victim of fake insurance scams. But based on the NAIC’s annual surveys, most consumers’ complaints involve less dramatic problems involving delays, denials, unsatisfactory settlements, cancellations and costly premiums.

Since insurance is the one thing consumers buy with the hope of never needing, aggravation should not be part of the purchase. Whether the insurer is ultimately at fault or not, there are preventive measures consumers can take to ensure future disappointment is minimal.

  • Know what the policy covers.  While 72 percent of consumers feel they have the right level of coverage, according to the NAIC, only a third of them are confident they actually understand the details of that coverage.  This leaves two-thirds of all policyholders a little hazy as to what they are actually paying premiums for.

As unappealing as reading one’s policies may sound, not understanding and being unpleasantly surprised is a real and costly risk for a policyholder and one undoubtedly swelling the complaint files.

  • Shop around. The Internet has brought pricing transparency to the industry.  Sites like and the Insurance Information Institute can help.  But, Holeman warns, do not let pricing alone be the guide.  The state departments of insurance compile complaint ratios for the companies doing business in their states.  Compare the companies offering the lowest quotes to their complaint ratios to help determine which are most likely to offer a satisfactory relationship along with good rates.

  • Investigate reputations. The online complaint sites will reveal the nature and trends in company-specific complaints. Obviously they only tell one side of the story, and often do not provide the story’s ending, but they can pinpoint situations where company policies are causing headaches for current policyholders. 

Fight Bad-Faith Insurance Companies (FBIC) offers consumers a user-friendly view of the individual states’ complaint ratio data.  The organization also maintains lists of the companies it feels are the fifty best and fifty worst insurers along with commentary, kudos or warnings for the companies on its lists.  Some of FBIC’s ‘worst’ insurers, however, actually show up with favorable customer satisfaction ratings according to the independent market research firm J.D. Powers. The company also monitors and publishes annual data on insurers’ satisfaction rankings based on interviews with consumers and is a good source for consumers.

  • Look for financial stability.  Odds are the storm or accident leading to a claim is years in the offing. It is important the insurer will still be around and solvent when it strikes.  A.M. Best Company and Standard & Poor’s rate the financial stability of the insurers.
  • Review policies annually. Things change — from the amount of personal property one has to the number of children living at home.  Coverage needs to keep up with increasing values and needs.

  • Avoid becoming a frequent claimer. Insurance is supposed to provide coverage against catastrophic, financially-ruining events, not the mundane.  Frequent claimers run the risk of being dropped by their insurers.  Frequent claims will also drive premiums up, which means taking care of the smaller claims out-of-pocket may save money in the long run.

Also, property claims in particular are reported to an industry database.  Too many claims involving one property could get that property blackballed from further coverage making it hard to sell because it has been deemed uninsurable.

  • Reconsider deductibles. A willingness to cover small loses out-of-pocket means carrying a higher deductible make more sense.  That would literally save quite a few cents since raising deductibles drastically reduces premiums.

  • Ask for discounts. If high premiums are a sore point, in addition to shopping around and raising deductible levels, consumers are advised to make sure they are getting all the discounts they are entitled to.  From being a non-smoker or having a clean driving record, to consolidating policies with one insurer — there are a number of opportunities to access discounted premiums.

  • Communicate before complaining. When an event does happen, keep the insurer informed. They hate being surprised.

And if the surprise comes in the form of a denial or poor settlement, have documentation at hand.  Ask questions and document answers — take names, record dates and keep notes as to conversations and any advice received from the very first phone call. In the event that a claim is handled unsatisfactorily, having documentation will make lodging a formal complaint more productive.

Also remember that advice on how to proceed and what can be realistically gained may be accessed free of charge through the department of insurance. The same department with the authority to investigate and resolve consumer complaints against insurers — just in case a ‘good neighbor’ is reluctant to offer a promised helping hand.