Policyholders protest that companies cancel and kick up rates
In one Monty Python TV skit, an insurance agent blandly informs a client that his premiums have been low only because his policy states, way down in the fine print: "No claim made by you will be paid."
To some American viewers, that no longer seems such a wild exaggeration. They have been filling the air with complaints that auto and property insurers, though they usually pay off if pressed, often turn around and penalize claimants by canceling policies, refusing to renew them, or raising premiums so high that the policyholder in effect winds up paying for an accident himself.
A sampling of policyholder protests:
> Lester Tobin, a physician in Lynn, Mass., paid premiums on a homeowners' policy and had a spotless record for 20 years. Three years ago he switched to Royal Globe Insurance Co., and since then he has collected $2,275 on three claims—two for water damage caused by heavy rains, one for a robbery. This year Royal Globe refused to renew the policy. After Tobin's agent made a personal appeal, it renewed, but for only one year, and it raised his deductible from $100 to $250.
> A Chicagoan, who requests anonymity because he works for Allstate Insurance Co., reports: "After an 18-year accident-free driving record, I put in my first claim this winter, for $350. I was not at fault; someone skidded into me on the ice. Now my insurance company [not Allstate] is going to increase my premium by 50%."
> Glen Young, a farmer in Ravenna, Ohio, after a prolonged hassle, got Western Reserve Mutual to pay $2,100 for his pickup truck, which ran into a ditch and was totally wrecked last October. A few days later, says Young, "I was told that my coverage would be terminated in 15 days, not only on the policies on my three vehicles, but also on the farm policy I have had for eleven years with Western Reserve's sister company, Lightning Rod Mutual." Young protested to his Senator, Democrat Howard Metzenbaum, and his coverage was extended after an aide to Metzenbaum phoned the insurance companies.
In hearings earlier this year, Metzenbaum, chairman of a Senate Judiciary Subcommittee, got an earful of such gripes. Widows and divorcees howled that their auto insurance premiums had been raised sharply because of their change in status. An Arizona college student and part-time waitress reported that a company had canceled her auto coverage because "waitresses are considered transients." Metzenbaum's conclusion: "A persuasive case has been made that, in order to maximize profits, property and casualty companies [a category that includes auto insurers] are rejecting 'clean' risks in an apparent attempt to eliminate all but the ideal policyholders—that is, ones with no losses."
In rebuttal, insurance companies assert that the complainers are a small fraction of policyholders. That seems to be generally true, but the record varies from company to company. In 1976 the Illinois insurance department got 2.2 complaints per $1 million of auto policy premiums for State Farm Mutual and 43.85 for Kenilworth, a much smaller firm.