For the typical consumer, the world of insurance can be filled with confusion, frustration and even heartache. When it comes to matters of insurance fraud, abuse and regulation, the situation gets even more intimidating. Some experts say insurance consumers simply don't have enough people and organizations advocating on their behalf.
Whether it's a matter of challenging an insurance company's stance on an auto insurance claim or trying to negotiate a better rate for home insurance, there are few places for consumers to turn for assistance, advocacy experts say. Meanwhile, insurance companies employ veritable armies of lobbyists, advocates and attorneys.
Outnumbered and outspent
Birny Birnbaum, executive director of the nonprofit Center for Economic Justice, highlighted this issue when he testified before a U.S. House subcommittee in July 2011. Birnbaum criticized what he perceives to be a state regulatory structure that provides limited accountability and “routinely favors insurance industry interests over consumer interests.”
“In the vast majority of states, there are no consumer organizations focusing on insurance issues other than health insurance,” said Birnbaum, a consumer advocate with more than 20 years of experience with insurance regulatory issues. “For the vast majority of regulatory issues, there are no consumer perspectives to balance out the many industry voices pushing for the industry policies. Even when there is a consumer voice, it is typically outnumbered and outspent by massive amounts.”
As an example of this imbalance, Birnbaum pointed out that on the day of his testimony, six representatives of nine insurance industry associations also were testifying. Birnbaum was the sole consumer representative.
Robert Hunter is director of insurance at the Consumer Federation of America, a nonprofit advocacy group. Hunter, who has more than 50 years of experience in the insurance industry, agrees with Birnbaum’s assessment. “It’s a totally unequal fight,” Hunter says.
The reasons for this inequality, Hunter says, are numerous. For one thing, he points to the fact that most state insurance commissioners are plucked from the insurance industry. Moreover, most commissioners typically go back to insurance after their state tenures are over, so even if a regulator is trying to do good by the consumer, Birnbaum says they often “won’t go out on a limb to the point where they jeopardize their futures.”
Secondly, the insurance industry spends hundreds of millions of dollars -- paid by consumers as part of their insurance premiums -- to lobby state regulators and state legislators.
Finally, Hunter says that with the exception of 11 states that elect commissioners, most insurance commissioners are appointed by the governor. This means there's often added political pressure to maintain a certain degree of status quo. Hunter refers to his own appointment as Texas insurance commissioner in 1993 by then-Gov. Ann Richards.
“(Richards) said to me, ‘Hey Bob, please don’t rock the boat too much. The insurance industry is powerful in the state legislature,’” Hunter recalls. “This is a huge problem for consumers. It’s totally unbalanced, and, if anything, Birny (Birnbaum) understated the problem.”
Insurance industry: We're responsive to consumers
Michael Barry disagrees. Barry, who is vice president of media relations for the Insurance Information Institute and former public affairs director of the New York State Insurance Department, says consumers have a far greater ally in state insurance departments than ever before.
“I think Birnbaum overstated the way the so-called odds are stacked against the policyholder,” Barry says. “I think most state departments of insurance see their greatest strength as being protectors of consumer interests. And with the amount of information out there accessible to policyholders, I think these are the good old days for consumers in terms of being able to do their homework and push back on insurance companies they may have a problem with.”
Increased competitiveness in the insurance market over the past several decades has prompted far great accountability on the part of insurers, says David Snyder, vice president and associate general counsel at the American Insurance Association, which represents insurance companies. The market, he says, is functioning “extremely well” for consumers.
“By every measure, personal lines of insurance are more highly competitive and diverse than ever before, and that’s the best indicator of how consumers’ interests are being served,” Snyder says. “And that also means the market is far more responsive to improvement and addressing consumers’ needs.”
Auto and home insurance: 'It's all on you'
In his testimony, Birnbaum highlighted his concerns with auto and home insurance -- sectors of the industry that he believes are particularly lopsided when it comes to consumer advocacy.
Consumer advocate Sonja Larkin-Thorne, a former vice president at The Hartford insurance company, explains that unevenness. She points out that most Americans get health insurance though their employers. Therefore, she says, those people don’t have the same advocacy concerns as they might with auto or home insurance, since the employer is providing the health insurance coverage and negotiating on the policyholder’s behalf.
“With health insurance, someone else does the work,” she says. “With home and auto, you make the decisions, you make the choices. It’s all on you.”
Larkin-Thorne says she's spent a great deal of time educating consumers on the importance of maintaining a close relationship with their insurance agents instead of merely buying insurance and forgetting about the policy until the time comes to file a claim.
“We drive our cars every day. We know we need to make sure the tires are safe and the breaks work. It needs to be the same with a home or auto policy,” she says.
Robin Smith Westcott, a former insurance regulator who recently became the insurance consumer advocate for the State of Florida, echoes this sentiment.
“Agents are our conduits to the company,” Westcott says. “Talk to them about life changes just like you would talk to your investment counselor about changes to your portfolio. It’s not a one-time conversation when you buy your policy or get your annual premium statement in the mail.”
Where to get help
The news for insurance consumers is not entirely bleak, says Amy Bach, executive director of United Policyholders, a nonprofit that advocates for consumers in all 50 states. She’s been an advocate since 1984. Bach says she can still “count on two hands” the number of people — like Hunter and Birnbaum — who are full-time advocates for insurance consumers, but that’s more than when she began. Yet that's still not enough, she says.
Bach stresses to consumers that they need to view their auto and home insurance policies as business transactions.
“Your insurance company may want to sell you insurance with the soft and fluffy message that they’ll be there when you need them, but an insurance policy is a legal contract. Your objective and the insurer’s objective are very, very different,” Bach says. “If you can’t handle the severity of that, you need help from a third party.”
Aside from United Policyholders (www.uphelp.org), here are some advocacy groups that can help you with insurance matters:
• Consumer Federation of America (www.consumerfed.org).
• Insurance Consumer Advocate Network (www.ican2000.com).
• Center for Economic Justice (www.cej-online.org).
• Consumers Union (www.consumersunion.org).
• Center for Insurance Research (www.centerforinsuranceresearch.org).