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Sha'Ron James


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Florida Consumer Advocate Calls for Probe of Insurers who Deny Claims Based on Credit History

10/30/2012

By: Charles Elmore

Palm Beach Post

The state’s insurance consumer advocate Tuesday called for an investigation into what she called “a troubling new trend” — insurers taking premiums for years but denying claims based on customer credit history.

Robin Westcott’s letter to Florida Insurance Commissioner Kevin McCarty cited cases involving Universal Property & Casualty Co., the largest property insurer in the Palm Beach County market after state-run Citizens.

Westcott, who has the authority under Florida law to recommend an investigation and enforcement action by state regulators, called the practice “abusive and inappropriate.”

Her letter to McCarty was made available late Tuesday. Attempts to reach Universal officials for comment were not successful.

McCarty’s office had no immediate response.

Underwriting guidelines approved by regulators allow companies to use credit reports to verify representations made by customers or exclude applicants with previous bankruptcies, liens or foreclosures, she said.

But in several cases handled by her office, Wescott said customers who paid premiums for years to Universal found their policies cancelled or rescinded only after they filed a claim. All the cases involved a bankruptcy or lien which occured years before the applicant applied for coverage, she said.

“I believe that the practice described to void coverage and/or deny claims for misstatements relative to credit history is an abusive practice that should be considered an unfair trade practice,” Westcott wrote.

If the information is really relevant to the policy, it should be verified at the start of the process, she said.

“The practice of ignoring readily available information to your potential advantage (collecting premium) and using it only when convenient (denying the claim) reeks of the same business practice we have seen recently for the use of death rolls,” Westcott said, in an apparent reference to settlements by Florida and other states with life insurers who failed to systematically reach out to beneficiaries after receiving death notices.

As of June 30, Universal had 69,856 policies in Palm Beach County, ranking second in the local market after Citizens.