State Insurance Departments
Prof. Stern over at InsureBlog had a noteworthy personal experience recently with the Ohio Department of Insurance. You can read about it here. There are a number of reasons to contact state departments of insurance. They can be quite helpful in providing information about basic state law requiirements or the status of insurance companies; information about things of a regulatory nature. But I've never found departments of insurance very helpful or effective in resolving claim problems or policing insurers. In my experience, the DOI will convey a consumer complaint to the insurer, get the insurer's response, pass it on to you and shrug. Nothing but the most brazen scams get much attention. I think part of the explanation for their lack of aggressiveness is limited resources. Part of it is bureaucratic inertia. Part of it is that rubbing shoulders on a regular basis with the insurers causes an overly friendly relationship with the industry. Part of it is that so many of the folks in decision-making positions are from the industry themselves and are naturally sympathetic to a rationale for a practice or denial that has a semblance of reasonableness. Part of it is the simple fact that an insurer or group of insurers can much more quickly and easily bring pressure to bear on an over-zealous regulator than consumers can effectively put pressure on indolent regulators. There is no substitute for having in place effective private mechanisms for policing insurers. Individuals must have the ability to obtain meaningful compensation for insurer actions that directly cause injury to their insureds. Too often, under state and federal laws, that ability to obtain meaningful compensatory damages, even punitive damages when wrongdoing is egregious, is unavailable to individual policyholders.