New York State
Eric R. Dinallo Superintendent of Insurance 25 Beaver Street New York, N.Y. 10004
|ISSUED 04/22/2008||FOR IMMEDIATE RELEASE|
INSURANCE DEPARTMENT FIGHTS CONSUMER RIP-OFFS
Agency Helps Consumers Resolve Insurance Disputes
The life savings of an 83-year-old Queens Village woman are nearly cleaned out when her neighborhood bank sells her a life insurance policy she neither wants nor needs. The employee of a small Long Island medical office is fired, told she no longer has health insurance and now owes $16,000 in medical bills. The widow of an Albany man learns her husband’s $100,000 life insurance policy has been voided.
What do these people have in common?
They represent a handful of the 55,000 complaints the New York State Insurance Department looks into each year on behalf of consumers seeking help. The complaints involve life, health, auto and virtually every other type of insurance policy and range from disputes over insurance settlements to the terms of a policy’s coverage.
“Consumers typically contact the Department when they are unable to resolve a problem with their insurer and believe they are being treated unfairly. When we investigate complaints, the Department seeks to address the individual consumer’s problem and we also determine if broader issues are involved. If so, we correct any pattern of improper practices that comes to light,” says Insurance Superintendent Eric R. Dinallo.
For example, when a policyholder complained that his insurance company had arbitrarily cancelled his annuity, an investigation found that the company had violated State law, which says that only the holder of an annuity may cancel it. The complaint led to a wider investigation which found the insurance company had improperly cancelled the annuities of more than 200 other people. In the end, the company agreed to make the policyholders whole by a combination of reinstating the annuities and reimbursing policyholders for their losses.
The situation involving the Queens Village woman began when she went to her neighborhood bank hoping to get a reference for a lawyer to draw up her will. Instead of getting advice, she left the bank after she unwittingly agreed to buy that a life insurance policy.
Months later, after realizing that premiums of nearly $40,000 a year would exhaust her life savings, the woman contacted a nephew, her only living relative. She told him she was pressured into buying the insurance policy.
The nephew, and later an attorney representing her, tried repeatedly -- and unsuccessfully -- to get the policy canceled. The bank, which earned a $22,000 commission on the sale, and the insurance company said nothing had been done improperly. The 30-day window to cancel the policy had long since passed.
The woman’s attorney then contacted the Insurance Department, which investigated and found that disclosures required under State law had not been made to the woman when the insurance policy was sold. The finding prompted the insurance company to cancel the woman’s policy and return nearly $80,000 she had paid for premiums, along with other expenses she had incurred.
Some other recent cases:
After receiving the woman’s complaint, the Department advised the insurance
company that the retroactive termination of benefits was illegal. The woman
was paid $16,000 to cover the cost of the surgery.
After looking into the matter, the Department agreed that the property
was over-insured and the company was obligated to pay only $97,000, the
actual cost of rebuilding the home. However, the Department pointed out
that the property had been inspected by the insurance company a year before
the fire and that the company failed to determine that it was over-insured.
The Department advised the company it was not fair to retain the premium
for the excess coverage and it was refunded to the policyholder.
The company said it denied the man’s complaint on the basis that the investor was told the interest would be three percent. The company changed course when Department personnel raised the issue of the written assurance. The interest rate was retroactively adjusted to five percent and the investor was issued a $9,000 payment because ignoring the written assurance would have violated the terms of the contract.
“Insurance is an essential part of life for every New Yorker. We need it to buy a home, drive a car, run a business and obtain health care for our families. Most insurance companies are reputable businesses. Most insurance sales people are reputable and perform a valuable service,” Superintendent Dinallo says.
“But insurance companies can make mistakes and the public needs to be aware that some individuals selling insurance are willing to take advantage of others for their own personal gain. People buying insurance need to understand what they’re getting into before they sign on the dotted line and later, if they do have a problem, they need to know the Insurance Department is here to help,” he says.
Consumers who believe that an insurance company, broker, agent or adjuster has failed to act in accordance with an insurance contract may file a complaint with the Department. On-line complaints may be filed at any time by accessing the Department’s Web site, www.ins.state.ny.us. The Department’s Consumer Services Bureau can be reached between 9 a.m. and 4:30 p.m., Monday through Friday, toll-free at 800-342-3736.
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