Ill. Reports Decline in Complaints Against Insurance Companies in 2002

Illinois consumers filed fewer complaints about their insurance companies and HMOs according to the 2002 consumer complaint statistics released by Director of Insurance J. Anthony Clark. A major exception to this trend, however, was an increase in complaints against homeowner insurers.

The Illinois Department of Insurance investigated 12,019 written complaints against insurance companies in 2002 compared to 12,269 in 2001, an overall decrease of 2 percent. Total complaints against health maintenance organizations dropped by 9 percent from 1,430 in 2001 to 1,299 in 2002.

In 2002, homeowner insurance complaints increased by 16 percent, from 1,257 in 2001 to 1,462 in 2002. The bulk of this increase occurred in complaints against companies’ underwriting practices, which increased from 389 complaints in 2001 to 678 complaints in 2002, a 74 percent increase.

Clark said, while he understands this trend, he is concerned by it. “Homeowner insurance companies have suffered tremendous losses over the past decade due to catastrophes, storm-related losses, and other factors. This has resulted in a change to the approach companies take to underwriting, pricing and marketing homeowner insurance,” he said. “In addition, most insurance companies use credit scores as a factor in their underwriting practices. Consumers are still learning that the cost and availability of their insurance are now also based on their credit record and not simply their claims history. This is producing more questions and complaints.” Clark also believes there is another trend affecting the increase in homeowner complaints to the Department. “Many insurance companies are requiring individuals to purchase their homeowner and automobile coverages from the same company. Companies may non-renew homeowner coverage if consumers do not move their auto coverage to their homeowner insurance company,” he said.

The only other major coverage recording any increase in complaints in 2002 was individual accident and health insurance, which witnessed an increase of less than 1 percent. In addition to HMO complaints, other lines with a decrease in complaints for 2002 included: automobile insurance, -1 percent; individual life, -14 percent; individual annuity, -11 percent; group accident and health, -8 percent; and group credit accident and health, -29 percent.

Despite the decrease in HMO and health insurance complaints, health insurance lines continued to receive the largest portion (40 percent) of all consumer grievances, while property and casualty lines accounted for approximately one-third (33 percent) of total complaints.

During the year 2002, the Illinois Department of Insurance made significant technological strides in the way it communicates with consumers and insurers. The implementation of an electronic complaint filing process enables consumer complaints received by e-mail to be electronically transmitted to participating insurers, significantly decreasing paperwork and the total time it takes to process the complaints by allowing staff to view and work complaint files electronically. “The electronic complaint submission process allows us to shorten the time it takes to resolve a complaint by as much as five days,” the Director said. “Not only are we able to handle consumer complaints more efficiently, but we have saved the State an estimated $495,000 per year.”

The Department has changed the way it reports consumer complaint data in 2003, providing the information in a simpler format. The Department is no longer listing ratios and rankings for companies.

The past use of complaint ratios was reportedly difficult to explain and a company’s rank was often misinterpreted. By providing only the essential information, The Department can supply the information consumers need to make better-informed decisions when choosing an insurance company.