Road to Recoveries: Complaints to Mo. insurance department increase

With help from a state agency, more Missouri residents are cashing in on claim complaints against insurance companies.

The Missouri Department of Insurance announced April 4 first-quarter recoveries topped $2.7 million based on 1,108 formal complaints handled by its Consumer Affairs Division.

The funds consumers recover from insurance companies vary each year. According to the most recent available data from the state, recoveries totaled $11.7 million in 2014, down nearly 38 percent from $16.1 million in 2013. Recoveries reached a record of $19.2 million in 2011, with 20 percent of that figure attributed to damages from the EF5 tornado that struck Joplin. Department spokeswoman Yaryna Klimchak said full-year data for 2015 were not available for release by Springfield Business Journal’s news deadline.

Conversely, formal complaints handled annually by the department increased roughly 6 percent to 13,553 in 2014, with 194 of those coming from the Springfield metropolitan statistical area. And given current market conditions, agents say that number isn’t going to decline any time soon.

“You’re going to see more of these come out just from the standpoint of more people doing business electronically,” Connell Insurance Inc. partner Tim Connell said.

Connell said insurance purchased online lacks access to an agent who can answer questions and help in matters of recourse. Customers then have little choice but to contact the state division for assistance.

That disconnect is spurring industry attempts at promoting the role of agents. Matt Barton, vice president of government and industry affairs for the Missouri Association of Insurance Agents, said the group’s national organization of independent agents is offering reimbursement toward member agencies’ advertising costs. If the ads promote services of independent agents, agencies receive 50 percent back – up to $500.

“Working with an agent on the front end can save a lot of hassle on the back end,” Barton said. “Consumers often go for the lowest-priced product, but it’s really important that they understand what they are buying.”

Health insurance
Between 2009 and 2014, as well as during the first quarter of 2016, health insurance lines led the pack in generating the most complaints.

In 2014, 1,606 health insurance complaints were logged, a 75 percent increase from the year before. As of March 2016, they numbered 414 so far this year, nearly as many as the next three categories – auto, life and annuities, and homeowners – combined.

Barton, who worked in the department for nearly 10 years including a stint as consumer affairs director, said the trend is consistent with his experience.

“People are going to use health insurance more often – hopefully – than auto or homeowners, so it stands to reason there will be more complaints and phone calls regarding that line of insurance,” he said.

Other factors affect the prevalence for health insurance complaints. Since it was enacted in 2010, the Affordable Care Act has required most American citizens, except those meeting certain criteria, to buy health insurance or pay a penalty. The leading reason for complaints filed with the state department – denial of claims – plus a common misconception that any form of insurance constitutes total coverage, points to another factor influencing the increase, Connell said.

“You’re not getting paid, so you’re upset,” he said. “Any claim is an emotional thing for a consumer to go through, and health – or life – insurance is going to be even more emotional because you’re talking about someone’s well-being.”

Education and litigation
Barton said not every call to the state division results in a recovery: In 2014, Missouri residents placed over 27,000 calls and less than half became formal complaints. The state, he said, reviews documentation from both sides and acts as a mediator in the process.

“Often there’s going to be coverage one way or the other,” Barton said. “Either the consumer understands they didn’t buy coverage for that claim, or the company understands the consumer makes a valid point.”

But when insurance companies and consumers reach an impasse on settlement, the only alternative becomes a civil suit.

Warren Harris, a partner at Taylor, Strafford, Clithero, FitzGerald & Harris LLP, said those disputes often center on what a policy means or what it covers. Even when consumers don’t review and understand their coverage, he said, they often have the advantage in court.

“Policies are, in essence, a contract, and companies do what they can to make them understandable to the average person,” Harris said, noting the insurance company has an obligation to draft unambiguous language. “It seems when companies do that, the courts believe they could have been more technical – and that is what makes it harder for people to understand.”

Although his firm hasn’t noticed a direct correlation between increased complaints and resulting lawsuits, Harris said the level of insurance litigation conducted in Missouri has increased over the last decade, particularly in areas of auto, homeowners and commercial liability. Like the causes behind increased health insurance complaints, he said a number of factors are driving the trend.

A common disagreement, Harris said, arises in matters of auto insurance. Missouri law requires $25,000 minimum coverage for motor vehicle insurance per person for bodily injury. Because the amount was implemented in 1986 and medical costs have increased over the past 30 years, the result is more legal disputes about what should and shouldn’t be covered by a particular insurance policy.

In the case of a car accident, Harris said that’s where insurance companies have to be careful. Section 537.065.1 of the Missouri Revised Statutes allows for both the injured and responsible parties to enter into an agreement wherein if judgments are handed down against the responsible party, and the claim was denied or not covered, a complaint is filed to litigate against the company.

“Missouri is unique because of that statute,” Harris said. “It allows plaintiff attorneys to constantly test the limits of insurance policies, and it’s a significant amount of what we deal with every day.”