CEJ issued a national report with Consumers Union entitled Credit Insurance: The $2 Billion a Year Rip-Off in March of 1999. The story was covered in at least 30 newspapers around the nation, including The New York Times, the Los Angeles Times, the Chicago Tribune,the Wall Street Journal, and the Washington Post. The report prompted the National Association of Insurance Commissioners to restudy credit insurance product pricing with a focus on credit property insurance in particular, and to draft model legislation for its regulation.
Credit Insurance Rate Reduction
As reported in the Wall Street Journal, CEJ requested a hearing on Texas credit insurance rates and lead the 1999 charge for consumers—at the time, the first credit insurance rate case in more than six years. As a result, the Commissioner reduced rates for credit life insurance by 21% and reduced rates for credit disability insurance by 18%, for a total savings of $80 million per year to Texas consumers. In his decision in the case, the Commissioner specifically mentioned his reliance on CEJ’s testimony and cross-examination of industry witnesses.
CEJ issued a report conclusively establishing that Texas auto insurers force low-income Texans to buy higher-priced policies to comply with mandatory insurance laws. Our follow-up report identified the insurers with the worst records. Virtually every major paper in the state, including USA Today, ran a story about the report. CNN/Time reported on the study, highlighting it as the only one of its kind in the nation. After ten state senators wrote a letter to the Commissioner demanding that he take action, the Commissioner took steps to increase insurance availability and the Department initiated an investigation of the companies CEJ identified. The investigation included a $10 million enforcement action against Nationwide Insurance Co. Insurers have reacted to our studies by filing lawsuits to suppress all releases of insurance availability data.
Telephone Disconnection Rule
A Texas Public Utility Commission rule allowed a local telephone company to deny local service to a consumer who owed a debt to a long distance carrier. Eight percent of Texas households do not have a telephone. Most of these consumers can afford local telephone service but cannot pay off the long distance debt. We sought and obtained a new rule to require telephone companies to offer local service (only) to these consumers.
Debunking the Tort Reform “Savings”
In the 90’s, the Commissioner of Insurance touted huge consumer savings from so-called tort reform legislation. We effectively debunked these claims by establishing that insurers earned over $2.8 billion in windfall profits in 1996-1998, and that consumers were not reaping the promised benefits of substantially lower insurance premiums. This windfall to insurers was realized at the expense of consumers.
Credit Insurance in Texas
CEJ continues to challenge insurance policy filings that are unfair to Texas consumers, directly resulting in important changes to policy filings in Texas that are “reference” filings—subsequent insurers will use them as models. CEJ has negotiated to remove phantom coverage, eliminate minimum premiums, eliminate subjective rating factors, and lower rates by 10-20%.
Insurance Rate Case Intervention
CEJ intervenes in insurance rate cases on behalf of low-income consumers as a class. In cases where we have not participated, the resulting rate increase has ranged from 23-48%. In the most recent case where CEJ participated, the Commissioner of Insurance mandated a 27% rate decrease.
Insurance Data Manual
Insurers routinely manipulate data to justify their requests for higher rates or changes in tort laws. We have been very successful in exposing these manipulations in insurance rate cases and tort reform debates and want to assist others in doing so. CEJ published an insurance data manual to assist consumer advocates in Texas and in other states in demystifying insurance company data.
Bringing Open Records Abuses to Public Attention
CEJ has helped expose abuses of Open Records provisions by state agencies, particularly those which routinely request Attorney General opinions on records that are clearly open to public scrutiny, and delay release of public information by requesting “reconsideration” after the Attorney General has verified that the information is public.
CEJ’s attorney authored a chapter on the discriminatory effects of homeowner’s insurance underwriting guidelines in a book on insurance redlining. The chapter received glowing reviews from the academic reviewers of the book. One reviewer called the chapter “the single most important and interesting chapter in the book… [it] provides a fascinating and extremely useful base for the industry and its regulators to re-examine some of the industry’s most basic and harmful standards.”
Insisting on Restitution for Injured Consumers
CEJ uncovered an illegal underwriting practice at Farmers Insurance Co., who overcharged new insurance consumers and violated a Texas Department of Insurance rule. The Department told the company to stop the practice, but did not fine the company for breaking the rule or instruct the company to refund the overcharges to the consumers. At CEJ’s strong urging, the Department instructed Farmers to pay over $500,000 in restitution to the injured consumers. In reviewing compliance with the new order, CEJ discovered yet another illegal underwriting guideline that resulted in overcharges to additional consumers. CEJ stepped in again, and the Department ordered restitution to those consumers, resulting in a total of 1.25 million dollars repaid to consumers.
CEJ identified and exposed the Texas Insurance Commissioner for hurting consumer interests in class action lawsuits. The resulting Wall Street Journal story showed that the Commissioner’s efforts to protect insurers and other big businesses allows wrongdoers to keep ill-gotten gains at the expense of consumers.
Discounts for Automobile Insurance
The Commissioner of Insurance proposed the repeal of a rule that requires insurers to provide a discount on automobile insurance for drivers who complete alcohol and drug awareness training. This training is instrumental in reducing losses and saving lives. When CEJ objected to the proposed repeal, the Commissioner changed his mind and kept the discount.
CEJ has successfully brought many issues to the public’s attention through the press. CEJ’s Executive Director Birny Birnbaum is one of the few consumer advocates funded by the National Association of Insurance Commissioners (NAIC) to attend and participate in NAIC meetings. The NAIC adopts model laws and regulations that many states then adopt as the law for their state. CEJ helped draft an NAIC model law which prohibits underwriting and claims payment discrimination against victims of domestic violence by property and casualty insurers.