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:

• The employee of a Farmingdale, Long Island medical office received approval for surgery under her employer’s health insurance plan. Following the operation, she was fired and her former employer retroactively cancelled her insurance. The insurance company then denied her medical claims.

  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.
  
  

• The widow of a 62-year-old man expected that benefits from his life insurance policy would ease her financial burden after his death. However, the insurance company voided the $100,000 policy, claiming her husband had misrepresented his health by failing to fully answer a question on his application. Had it been answered correctly, the company said, it would have never issued the policy. The company reversed its decision and paid death benefits to the widow when the Department challenged the basis on which the claim had been denied.
  
  
• After fire destroyed a Washington County home, the property owner’s insurance company told him it would pay only $97,000 of the $148,000 coverage under his homeowner’s policy. The company said the property was over-insured.

  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.
  
  

• When a 77-year-old man Long Island man invested more than $100,000 in an annuity in 2002, he received written assurance he would earn “around five percent” interest from the second to fifth years of the investment. After five years, the man noticed his earnings were actually closer to three percent. He contacted the Department when he was unable to resolve the dispute with the company.

  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.