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NAIC highlights consumer complaints

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State insurance departments received nearly 280,000 official complaints and 1.9 million inquiries last year, according to a recently released report from the National Association of Insurance Commissioners (NAIC). That is an increase of 20,000 complaints compared to 2013, while consumer inquiries actually dropped from 2.1 million.

Volume 1 of the 28th edition of the Insurance Department Resources Report from the NAIC provides key statistics on the resources and regulatory activities of the 56 NAIC-member jurisdictions, including states and U.S. territories. In addition to information by state on the number of departmental staff, their functions, annual budgets, revenue flows, the number of insurers and insurance producers, the report includes data on the number of consumer complaints and inquiries broken down by state, and provides some interesting insight on fines, license suspensions and revocations.

For instance, who would have predicted that West Virginia (380) and Tennessee (216) would have by far the highest total number of producer suspensions, while industry activity hotbeds such as California (50) and New York (0!) would lag significantly behind? California did have the most producer license revocations in 2014 with 424.

Another surprise is that Delaware levied fines on producers far more than any other state (5,671), accounting for about 5 out of every 8 fines in the country in 2014. But while Delaware’s fines only averaged about $236 per incident, the average fine amount in the state of Texas was a whopping $21,815.

Overall, the report reveals that 8,650 fines and 684 restitutions were levied against insurance producers in 2014; 1,201 licenses were suspended; and 1,884 licenses were revoked.

The statistics were a little more predictable when it comes to consumer complaints by state, with highly populated California, New York and Texas generating the most complaints. California also has by far the largest insurance department budget, which at a staggering $195,551,000 is a full $48 million more than second-place New York. Wyoming is the state with the smallest insurance department budget at $2,796,134.

Each state insurance department has a mechanism in place for responding to and resolving consumer complaints, and also encourage consumers in each state to check with the insurance department before buying insurance from a particular company or agent to ascertain whether any complaints or regulatory actions have been taken against a provider.

While every state investigates fraud, the NAIC report says many states have formed separate criminal insurance fraud units. These units, which may or may not reside within the state’s insurance department, investigate insurance fraud in order to prevent unscrupulous individuals from harming consumers and to keep fraudulent claims from increasing the cost of insurance.

Some units are limited as to the types of insurance fraud that may be investigated, and the investigators in some units have peace authority (authority to place persons under arrest). The increasing awareness and scrutiny focused on insurance fraud has led to an increase in the number of fraud investigators employed by the state insurance departments in recent years.

The second volume of the report, which focuses primarily on premium volume by type and by state, will be released by NAIC in August.

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Here is a snapshot of some of the pertinent data included in Volume 1:

States with most producer suspensions (2014):

1. West Virginia 380
2. Tennessee 216
3. Florida 60
4. Colorado 56
5. California  50

13 states had no suspensions, and another 18 had fewer than 5 suspensions.

Source: NAIC 2014 Insurance Department Resources Report, Volume 1, Table 22

States with most producer revocations (2014):

1. California 424
2. Florida 235
3. Louisiana 128
4. Ohio 80
5. Wisconsin 78

5 states had no revocations (Alabama, Montana, New Mexico, North Carolina, Oklahoma) and another four had 5 or fewer revocations.

Source: NAIC 2014 Insurance Department Resources Report, Table 22

States with the highest number of fines against producers (2014)

1. Delaware 5,671 totaling $1,335,850 ($235.56 avg. fine)
2. Ohio 368 totaling $150,125 ($407.95 avg. fine)
3. New York 187 totaling $846,150 ($4,524.87 avg. fine)
4. Texas 168 totaling $3,664,949 ($21,815.17 avg. fine)
5. Louisiana 164 totaling $60,401 ($368.30 avg. fine)
  TOTAL (all states) 8,650 totaling $18,296,118 ($2,115.16 avg. fine)

Source: NAIC 2014 Insurance Department Resources Report, Volume 1, Table 22

States with the highest number of consumer complaints (2014)

1. California 37,807
2. New York 36,708
3. Texas 27,022
4. Florida 17,056
5. Maryland 13,619
  TOTAL (all states) 279,980

5 states (Alaska, North Dakota, Rhode Island, Vermont, Wyoming) had fewer than 500 complaints.

Source: NAIC 2014 Insurance Department Resources Report, Volume 1, Table 23

States with the largest insurance department budgets (fiscal year 2016)

1. California $195,551,000
2. New York $147,583,000
3. Texas $116,925,480
4. Florida $86,304,896
5. Illinois $56,692,100
  TOTAL (all states) $1,382,299,432

10 states had insurance department budgets of less than $10 million.

Source: NAIC 2014 Insurance Department Resources Report, Volume 1, Table 7