Three Pro-Consumer Insurance Reforms

The insurance industry is in dire need of reform. For too many insurance companies, profits have clearly trumped fair dealing with policyholders. The industry has done all it can to maximize its profits and rid itself of claims. Insurance leaders have lost sight of their legal and ethical responsibility to policyholders. Now they answer only to Wall Street. The time is due for insurance reform that will level the playing field for consumers.

1. Require Insurers to Work in Good Faith with Consumers
Many states have introduced, and some have passed, "Insurer Fair Conduct" bills which establish a private right of action by a first and/or third party against insurers for failure to act in good faith. Insurers must be held to fair conduct standards when evaluating and settling claims.

2. Require Prior Approval of Rate Increases
Require insurers to obtain commissioner’s approval of proposed rate increases of 10 percent or greater, and authorize interested parties to intervene in rate proceedings. In most states, insurers can raise rates without the approval of the Insurance Commissioner. Rates are either automatically approved absent action on the part of the Commissioner, or the Commissioner has no authority to disapprove increases. The goal is to explicitly authorize— or even require—the Commissioner to hold a hearing prior to approval.

3. Establish an Insurance Consumer Advocate
States should ensure there is a consumer advocate either on the state’s Insurance Commission or within the office of the Insurance Commissioner. Some states have already done so. For example, in 1991, the West Virginia legislature created the Office of Consumer Advocacy, charged with representing consumers’ interests in health care issues. The Consumer Advocate is also authorized to represent the public interest in matters coming before the Insurance Commission.

(Reprinted from: The American Association of Justice publication, "The Ten Worst Insurance Companies." http://www.justice.org/cps/rde/xbcr/justice/AAJ_Report_TenWorstInsuranceCompanies_FINAL.pdf