State Insurance Dept. Found Far Behind on Complaints

The state auditor general’s office said Monday that the California Department of Insurance was “slow to process” more than 50% of nearly 14,000 consumer complaints it received in the 1984-85 fiscal year and that “as a result, the public did not receive prompt protection from unfair insurance practices.”

In a few cases, it said, complaints have not been acted upon for more than two years.

In a report to the Legislature, Auditor General Thomas W. Hayes added that in many cases, would-be complainants find it difficult to even reach the department.

Citing Pacific Bell reports, Hayes said , “During a one-week period in March, 1986, consumers received busy signals more than 7,000 times, when attempting to telephone the department.”

Charging that “the public lacks protection against improper conduct” by insurance companies, the auditor general recommended that the Department of Insurance assign more people to handle complaints, install additional telephone lines and consider asking the Legislature for funds to install statewide toll-free lines. He also recommended closer monitoring of complaint backlogs.

In a lengthy written response that was attached to the report, Insurance Commissioner Bruce Bunner said:

“While the comments of the auditor general have merit, we are nevertheless deeply disappointed that their report does not acknowledge the positive direction and usefulness of (our) self-initiated activities to better serve the consumer.”

Bunner’s chief of consumer affairs, Everett Brookhart, said in an interview that in some respects, the report is out of date, because the department has already obtained authorization from the Deukmejian Administration to add six temporary staff positions and has been working to reduce its complaint backlogs.

This was similar to the response Brookhart gave 10 days ago, when another state review agency, the legislative analyst’s office, also castigated the department for its complaint backlogs.

The auditor general’s report, however, was lengthier, much more comprehensive and more pointed in its criticism of the department, which has long been charged by consumer advocates with being too oriented toward the insurance industry.

Hayes said the standards the auditor general’s office used for determining whether handling of a complaint was slow were the guidelines set by the Department of Insurance itself. The department tells workers in its bureau of consumer affairs that complaints should be acknowledged within 10 working days, should be forwarded on to the appropriate private insurance company within 10 working days and should be acted upon at least once every 30 days.

According to the auditor general, it took an average of 89 days for the Department of Insurance’s bureau of consumer affairs to process the 7,025 cases he said were handled too slowly.

The record was even worse, he said, in the department’s investigation bureau, which handled 1,151 complaints involving “allegations of economic loss and emotional distress caused by fraud, misrepresentation, dishonesty, incompetence and other illegal acts.

“Of these complaints, 135 were over one year old and 44 were over two years old,” Hayes said. “Yet the investigation bureau still has not investigated these complaints.”

For example, he said, “the investigation bureau had not investigated a complaint alleging that an insurance agent issued invalid insurance policies to a consumer who paid his premiums in good faith.”

“However, after the consumer suffered a loss of $14,000, the insurance company informed him that he did not have insurance coverage,” he said.

In other points, Hayes said his examiners found that the Insurance Department’s market conduct bureau had not been effectively reviewing patterns of insurance company conduct, often spending its time reviewing companies with good records, while passing up reviews of those with questionable ones.

He also said a January, 1986, public report by the department of the justified complaint ratios against automobile insurance companies had “contained inaccurate and incomplete data that resulted in incorrect rankings for automobile insurance companies,” leaving out altogether many of the companies with the best records.

In his response, Bunner said complaints have risen dramatically in the last year “in all areas, but particularly in the area involving the availability/affordability of coverage.” Availability complaints alone, he said, have increased more than 1,000%.