Tiny agency vs. insurance giants

Little-known Md. People's Insurance Counsel takes a second look at complaints and results

April 20, 2008|By James Drew | James Drew,Sun reporter

When his insurer demanded more money on a homeowner's policy he had already paid for, Harry M. Trebing turned to the Maryland Insurance Administration. Soon the Baltimore County resident was fighting not only the company but also the state agency he had hoped would help.

The insurance administration sided with the company. But it reversed itself last year - after the little-known office of the People's Insurance Counsel intervened.

Since opening two years ago, the office has been an independent advocate for consumers and a lightning rod for criticism of the insurance administration's handling of the roughly 16,000 complaints a year it receives.

Ilene Nathan, who was insurance counsel until recently, said many consumers "really feel they are not heard fully and the investigator listened to just what the insurer said."

But the counsel has a small staff, and its authority to help consumers who feel slighted by Maryland's insurance administration is limited to homeowners' and medical professional liability insurance. While the administration strongly defends its performance, it cannot say what percentage of consumers' complaints are upheld or denied.

By contrast, some other states offer the public more data on complaints and have insurance counsels with greater power to help consumers.

On the Web site of the Texas Department of Insurance, for example, consumers can track the number and type of complaints received on a quarterly basis and see how many were deemed "justified" and "unjustified."

Rhode Island's insurance advocate says she can tackle any type of insurance complaint because "the idea is to level the playing field between the insurance companies and the consumer."

Nathan said consumer criticism of how the Maryland Insurance Administration might prompt the agency to examine how it handles complaints, including whether to use an "in-house ombudsman" to review them, and study whether enough receive legal review.

State Insurance Commissioner Ralph S. Tyler says the MIA does a good job holding companies to the law, recovers millions of dollars for policyholders by reviewing insurers' practices and uses a "rapid response" program to try to resolve some complaints quickly.

"The consumer is not equal in the bargaining position with the insurance company," Tyler said. "So our function is to provide some balance to the relationship."

Hard to judge

But it's almost impossible to evaluate how complaints are resolved by the MIA, which has primary responsibility for protecting consumers.

In its annual reports, the insurance administration breaks down the disposition of complaints into dozens of categories, each accompanied by a code requested by the National Association of Insurance Commissioners.

"Is it useful, these types of numbers? Probably not," said Howard Max, the MIA's associate commissioner for life and health insurance, who added that the NAIC is trying to simplify the codes.

The MIA says publishing a report card on how it resolves complaints would be a daunting task that would serve no purpose. Because the agency does not maintain the huge number of complaint files electronically, it is impractical for an outsider to analyze the MIA's practices.

"Whether the insurance commissioner does his job well, nobody knows," said Steve Hannan, executive director of the Maryland Consumer Rights Coalition.

Until the office of People's Insurance Counsel was created, no one could effectively challenge the MIA's complaint investigations without filing an administrative appeal or suing in court. But the office has too few people and too little authority to be more than a bit player in conflicts between consumers and companies.

The insurance counsel is part of the Attorney General's Office and modeled after the People's Counsel that pursues utility issues in Maryland; it's funded through assessments on insurers. Originally staffed with four people, it's down to two today because Nathan resigned last month to take a different job with the attorney general and another employee quit in 2006 and was not replaced.

Senate President Thomas V. Mike Miller, who was the driving force behind creating the People's Insurance Counsel, applauds its work but said it's too soon to recommend a larger role.

The office was set up at a time of concern over hurricane damage claims and availability of medical malpractice coverage. The counsel's authority is limited to making recommendations to the MIA, which has the final say.

"Insurance companies are responsive to their shareholders," Miller said. "They are responsive to their executives. They take a hard-nosed position time after time after time when people go to them with a concern and a complaint. There really is nobody on the other side advocating on behalf of the little person."

Attorney General Douglas F. Gansler said he expects Nathan will be replaced "in short order."

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