Courtesy of Texas Watch Online
12/12/01

In April an Austin area man and his pregnant wife were injured in an auto accident caused by another driver. After three weeks of rude treatment, run-arounds and delays from the at-fault driver’s insurance company, the couple filed a complaint with the Texas Department of Insurance. With no action after the complaint, they were forced to file with their own insurance company to repair the car damage. Seven months after the accident, they still have not received payment for medical expenses or lost wages and the Texas Department of Insurance has closed their file on the complaint with no action.  
 
When consumers face classic run-around, delay and bullying tactics from Texas insurers, consumers have few resources to which to turn for assistance. Filing a report with the Texas Department of Insurance (TDI) is often the last resort for frustrated citizens who have been treated unfairly by insurance companies, but just how effective is TDI’s complaint system at helping to resolve claims? Does TDI have the authority and ability to advocate for consumers or hold irresponsible insurance companies accountable? If not, what options do consumers have?  
 
In an effort to address these questions, Texas Watch recently conducted a study of auto liability insurance complaints filed at TDI between 1996 and 2000. The study analyzed TDI complaint statistics and reviewed complaint files received through an open records request. The study indicates a significant rise in the number of complaints filed by Texas drivers against auto insurers and the ineffectiveness of the TDI complaint process to resolve consumer complaints.  
 
Trends in Auto Insurance Complaints Made to TDI  
 
Texas Watch examined trends in auto insurance complaints from 1996 to 2000 based on TDI complaint filing records. Delays in handling claims ranked as the top complaint every year from 1996 to 2000. Other frequent complaints included denial of claims and unsatisfactory settlement offers.  
 
-There were 14,082 complaints filed against Texas auto insurers in 2000, up from 10,847 complaints filed in 1996.  
 
-Delays in claims handling accounted for 36% of all auto insurance complaints filed in 2000 and 49% of complaints filed by 3rd parties (drivers who were not at fault).  
 
-There was a 27% increase in the number of delayed handling complaints from 1999 to 2000, while there was a 9% decrease in number of total complaints.

As fewer consumers found reasons to complain about excessive rates and customer service between 1999 and 2000, more consumers were compelled to complain about delays in claims handling. The data suggests that while insurance companies may have practiced better claims handling overall last year, they are delaying substantially more claims.  
 
A Close Look at How 3rd Party Auto Complaints are Handled  
 
Texas Watch also performed a detailed, case-by-case review of 331 third-party (driver who is not at fault) auto liability complaints filed in the second quarter of 2001 involving delays in claims handling. This in-depth study allowed for an evaluation of the actions taken by TDI when complaints are filed and provided insight into the specific causes of complaints.  
 
The TDI Complaint Process and Its Effectiveness  
 
Upon receipt of a complaint, TDI sends a written acknowledgment to the complainant and notifies the insurance company of the complaint. The insurance company is given ten days to respond to TDI and that response is then forwarded to the complainant with any recommendations from TDI. TDI does not guarantee that participating in this complaint process will resolve the claim in question. Our study found that this process was followed consistently.  
 
-Claims were fully resolved in only 34% of the cases examined. Claims were partially resolved 13% of the time and 53% of the cases were still unresolved when TDI closed their file on the complaint.  
 
-In 63% of studied cases TDI did not provide any recommendation as to how to resolve the claim. In 19% of cases TDI recommended contacting an attorney if the complainant wished to pursue the claim.  
 
-TDI took some action on behalf of the complainant only 15 times in the 331 cases examined. In 95% of studied cases, TDI simply acted as a go-between for correspondence.  
 
What is Causing the Delays?  
 
-22% of delays resulted from an insurance company’s failure or inability to contact their policyholder. In some cases, this caused delays for several months.  
 
-15% of delays resulted from clerical errors made by the insurance agency, including sending the settlement check to the wrong address, misplacing files, and making a settlement check out to the wrong name.  
 
-13% of delays resulted from a dispute over who was responsible for causing the accident.  
 
-12% of delays resulted from an insurance company offering a settlement that was deemed unfair or incomplete by the complainant.  
 
What Does This Mean for Consumers?  
 
Our research shows that every year more people turn to TDI to look for help with their delayed claims. With apparently limited authority to correct actions or behavior, TDI seems to be ineffective at achieving resolutions for complainants. This study indicates that consumers need more tools with which to advocate their case and a stronger authority to which they can turn to hold insurance companies accountable for paying legitimate claims.  
 
In the face of classic delay tactics, consumers find little recourse or remedy from TDI and have few alternatives. Many of the individuals who have filed complaints were forced to pay damages out of their own pocket, turn to their own insurance companies or forgo repairs altogether.  
 
How Texas Watch is Helping  
 
During the last two legislative sessions, Texas Watch has supported bills designed to bring fairness to the insurance claims process. Dozens of Texas Watch members from across the state who have experienced abusive insurance tactics first hand came to the capitol to lobby and testify in favor of these bills which called for:  
 
-Requiring insurance companies to provide complete and truthful information to consumers during the claims process.  
 
-Prohibiting insurance companies from distributing misleading and deceptive communications.  
 
-Creating a 30-day period following a claims settlement in which Texans could opt out of a unfair settlement if they were tricked or pressured into it.  
 
-Increasing access and availability to insurance for Texas families.  
 
-Controlling the rise in insurance costs.  
 
How You Can Make a Difference  
 
Texas Watch will continue to support legislation designed to level the playing field between insurance companies and Texas families by giving consumers more tools, information and power. To help reform the insurance industry, you can share your story of insurance abuse, contact your legislators before important votes or testify in favor of beneficial legislation. You can find out how to participate at www.texaswatch.org. To get involved, you can also call Stacey toll-free at 1-888-738-4226.
 
 

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