What State Farm Doesn’t Want You To Know About Choosing an Insurance Company.

With most products that you purchase, you can look at the product, inspect it, look at consumer reviews, and otherwise find out about the quality of the product. Not so with insurance. With insurance, the product is the insurance coverage being offered and how well the insurance company pays claims. Unfortunately, State Farm and other companies would rather spend their money making funny Super Bowl ads and talking about discounts than providing this essential information.

Most of the information helpful in choosing an insurance company is readily available in documents that insurance companies file with state departments of insurance, like the Alabama Department of Insurance. Unfortunately, insurance companies often push to pass laws that keep the insurance departments from reporting this information to policyholders like the following law:

Any information reported to the department by an insurer pursuant to this article is considered a commercially valuable trade secret as defined in Section 8-27-2, and shall be confidential. However once the information from all of the insurers is aggregated, then the department may provide such information in accordance with this article. The department, absent a court order, shall not release this confidential information. Notice of at least 10 business days shall be given to the applicable entity if such information is ordered to be provided by the department.

Ala. Code §27-22-5.

Policyholders must require transparency from insurers so that policyholders can obtain the information necessary to make informed decisions about which insurance company they want to insure their life, home, and other valuable possessions.  The following is a list of seven ways that the Alabama Department of Insurance or insurance companies could help policyholders make better decisions.

1.     Make sample policies available with clear easy to understand explanations of key terms. Many insurance companies do not make their policies available to the purchaser until after it has been purchased. This is like seeing a car for the first time after you have bought it.

2.     Make claims data available, including (1) proportion of claims closed without payment and with payment to opened claims, (2) median time to payment of a claim, and (3) median claim payout by line. Consumers could use this information to pick companies that paid a higher percentage of claims in a shorter period of time.

3.     Make the number of consumer complaints against an insurance company available on a readily visible portion of the website.

4.     Link to the NAIC consumer insurance company search tool (https://content.naic.org/cis_consumer_information.htm)  on website. This handy tool allows consumers to look at different reports on insurance companies, including complaint reports.

5.     Make complaints against insurance companies publicly available. Many states allow consumers to access the complaints. Alabama did, but stopped doing so in the last couple of years.

6.     Make market conduct examinations publicly available. Market conduct examinations are insurance department investigations of the business practices of insurers that often come about in response to repeated complaints. Departments of insurance should be vigilant in conducting them and should make the results available to the public.

7.     Make approved policy forms publicly available and easy to access. Before an insurance company can issue a policy in a state, it must have the policy form approved by the department of insurance. These approved forms should be readily available so that consumers can make sure that their policy complies with state law.

8.     Require insurance companies to make their claims manuals and other rules they use in deciding claims available to the public so that policyholders can know that their claims are being decided without bias.

To facilitate some of these items, the legislature will need to revise existing confidentiality protection to allow disclosure of this important information to Alabama policyholders. However, doing so will encourage healthy competition among insurers, hold stingy insurance companies accountable and help insureds. If you want better information regarding your insurance company, contact your local representative and the department of insurance and urge them to pull back the veil of secrecy protecting insurance company claims data and complaints.

This post relied heavily on the Essential Protections for Policyholders work done by Rutgers University and United Policyholders which can be found here. www.epp.law.rutgers.edu