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Insurance Consumer Advocate

Sha'Ron James

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Fine of Universal looks more like a slap than a sting


Editorial, Palm Beach Post

Either it’s too hard to punish an insurance company in Florida or regulators aren’t trying hard enough.

Last fall, Florida’s insurance consumer advocate wrote to alert Insurance Commissioner Kevin McCarty about a “potentially unlawful action” by the state’s largest private property insurer called “post-claim underwriting.” Policyholders had filed claims with Universal Property and Casualty Insurance Corp., after which the company had found some minor problem in the policyholder’s credit history — as opposed to an issue of fraud — to retroactively cancel the policy and deny the claim. The Post reported two denials after claims of $10,000 and $90,000.

Last week, the Office of Insurance Regulation fined Universal $1.26 million and ordered more than a dozen changes in the company’s business practices. For perspective, Universal made roughly $30 million in 2012. While Consumer Advocate Robin Westcott and others praised the fine, you have to wonder if Universal will treat it as the cost of doing business. And will the company have to pay those claims it invented ways to reject? That is uncertain.

The harshest punishment is for regulators to revoke or suspend a company’s license. Since Universal has 542,000 homeowner policies, behind only state-run Citizens, either is unlikely at this point. A spokeswoman for the Office of Insurance Regulation said state law sets out how much a company can be fined. Any “nonwillful violation” carries a maximum penalty of $5,000. A “willful violation” can draw up to a $20,000 fine.

In Universal’s case, the Office of Insurance Regulation spokeswoman said in an email, the figure of $1.26 million was “the result of a combination of factors found during the examination process.” Apparently, none of the violations was determined to be “willful.” So, does the $1.26 million penalty mean that Universal is getting off light? “The Office must adhere to Florida law in determining administrative fines levied on an insurer.” And does the ruling mean that University will have to pay claims it wrongly denied? “The direction was for (Universal) to review those policies and procedures and provide additional information as directed in the order. Until that review is performed, no determination can be made regarding any possible restitution.”

There doesn’t even seem to be certainty about whether Universal can cancel policies more than 90 days after they take effect for reasons the company should have uncovered earlier. The Florida Legislature passed on making that state law. Obviously, regulators don’t want to cripple a private company with so many policies. But the argument that private companies are more reliable than state-run Citizens doesn’t work if the company collects premiums but doesn’t pay claims. Regulators don’t need to cripple but they need to deter.