Connecticut Insurance Department Fines Safeco Companies $434,000
August 3, 2009
The Connecticut Insurance Department filed an order last week fining
five subsidiaries of Safeco for a total of $430,000 for improper
cancellations; improper ratings; employing unlicensed agents and
adjusters; and other violations of the state's law.
Among the subsidiaries included in the fines were Safeco Insurance
Co. of America in Washington (which received the largest fine of
$144,500); Safeco Insurance Co. of Illinois ($104,500); General
Insurance Co. of America in Washington ($76,000); American States
Insurance Co. in Indiana ($68,000); and American Economy Insurance
Co. in Indiana. ($41,000).
The violations varied among these.
"While the Connecticut Insurance Department acknowledges Safeco's
commitment to corrective action, we are disturbed by the number
and breadth of violations our exam team uncovered," says Connecticut
Insurance Commissioner Thomas R. Sullivan. "Our examination
of this firm calls into question the extent to which they have proper
compliance monitoring and controls. On behalf of consumers of this
state, we will be actively scrutinizing this company going forward
to ensure they are committed to conducting business within the boundaries
of our insurance laws."
While the violations varied by company, there were consistent violations
related to instances of unlicensed adjusters and agents not appointed,
according to the Connecticut Department of Insurance. In Connecticut,
insurance companies are required by law to formally appoint and
register with the state all agents who sell insurance products on
their behalf. When combined, the state found that among Safeco and
its subsidiaries, there were 55 instances in which agents were not
appointed and 93 instances where individuals acted as adjusters
without being licensed in accordance with Connecticut law.
Other violations included instances where the company left "loss
of use" amounts off claimants' settlements, according to the
state insurance department. According to information from the state,
this occurred on average 23 percent of the time across all subsidiary
companies. (Loss of use is the amount owed to claimants for the
time during which they were not able to use their vehicles due to
the damage involved.)
In addition, state officials say they discovered numerous underwriting
and rating errors, which resulted in mistakes on premiums charged
to customers. These mistakes, which included both under- and over-charging
of premiums, also were found across all five of the Safeco subsidiaries
involved and were related primarily to commercial policies.
Safeco has complied with the state's investigation, stipulation
and final order regarding the fines, according to the state, and
will be required to submit a compliance report to the insurance
commissioner within 90 days.
The department examined the company's practices during a period
of May 5, 2008 to approximately October 17, 2008. According to the
insurance department's report of Safe, several of the undercharges
were found to be related to "incorrect full glass coverage
The Safeco subsidiaries were to refund the overcharges to those
affected. Among the claims reviewed 60 of 5,572 auto glass claims
were evaluated as a part of the market conduct examination.
The fines follow a large fine recently levied by the Connecticut
Insurance Department against Massachusetts-based Liberty Mutual
Insurance Companies. (CLICK
HERE for related story.) The Liberty Mutual violations incurred
a fine of nearly $1 million and spanned four subsidiaries, included
incorrect auto and commercial ratings; misconduct involving licensing/appointment
of agents; licensing of adjusters/appraisers; and instances of improper
claim settlement. Liberty Mutual also was forced to pay reinstitution
(included in the nearly $1 million fine) to 3,595 policyholders
who were overcharged for their policies.
HERE for full text of report.
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