Long road to Consumers who overpaid on auto insurance because insurers used illegal criteria to set rates are unlikely to see a refund anytime soon, if at all.
policy refunds
State penalties against
some auto insurers don't
mean automatic rebatesBy Lyn Danninger
ldanninger@starbulletin.comThough the state Insurance Division is seeking penalties against insurers who used age, marital status, length of driving experience or credit history to determine rates, it is unsure whether it would have the power to order refunds.
And private lawsuits against four insurance companies have not been granted class-action certification, though it will be sought. Thus far only a few policyholders named in the suits against AIG Hawaii Insurance Co., Allstate Insurance Co., State Farm Mutual Insurance Co. and Progressive Insurance Co. are potential beneficiaries of any award.
|
Attorney Tom Grande, who is involved in several of the cases, is hopeful the suits will gain class status soon. That means those policyholders, unless they requested otherwise, would be considered part of the suit.He believes there is a good likelihood of class certification being granted, especially since the Insurance Division found that insurers were in violation of the law and will levy fines against a number of insurance companies.
The court would have to find that the insurance companies have been breaking the law and decide how much consumers have been overcharged, he said.
Auto insurers, though, say the suits are unnecessary in light of the Insurance Division's enforcement and are fighting the suits.
"We feel strongly that the law suits are unnecessary because it's really an administrative issue and the courts or attorneys should defer the matter to the Insurance Division," said Carolyn Fujioka, a spokeswoman for State Farm.
At least one auto insurer, Progressive, has filed a notice to transfer the suits to federal court, arguing the federal Fair Credit Reporting Act pre-empts state law.
Attorney Bruce Wakuzawa, who filed suit against Progressive, want the case kept in state court.
"Assuming that we win and it goes back to state court we would then move to certify it as a class," he said.
His suit alleges that by not following state law, Progressive used "unfair and deceptive" trade practices.
A hearing is scheduled for Dec. 20 in federal court.
The Insurance Division may also need rely on the courts to order any refunds, since it is unclear whether it has the authority to do so on its own. Insurance Commissioner Wayne Metcalf said his office is determining whether it can order consumer rebates.
"What we'd like to see is consumer relief and we are examining whether we have the legal authority or would need to go to court," he said.
Of the approximately 28 firms facing action by the division, Metcalf said he found violations at a significant number of the major companies that control much of the market. Some were found to have violated more than one provision of the law, he said.
"It's a number of major companies in Hawaii," he said. "That's the disturbing part that they appear to be in clear violation of the law."
Metcalf said the insurers have until the middle of the month to respond to the notices of violation. Once the insurers respond, Metcalf said, the division will release names of the insurers and the related fines.
Hawaii's anti-discrimination law was enacted in 1987 and prohibits insurers from considering things like age, sex, ethnicity, marital or credit status, or physical disabilities either directly or indirectly when setting insurance rates, Metcalf said.
But the insurers disagree with Metcalf, and say they use risk factors to assign policyholders into low-, medium- or high-risk pools under different corporate entities. The worse the risk, the higher the rates.
"We believe that we've cooperated with the Insurance Commissioner although we've made it clear that we disagree with the Insurance Division's interpretation of the statute," State Farm's Fujioka said. "We have agreed to conform our practices to the division's interpretation."
Fujioka also disagrees that her company's policyholders were overcharged.
"We don't believe any State Farm customer was charged higher rates," she said.
Metcalf isn't impressed with the insurers arguments.
"The best indicator of risk is an individual's driving record. The courts have an elaborate points system to determine these things. That's what insurers should be using," he said.
>> Hawaii's anti-discrimination law, enacted in 1987, prohibits insurers from considering things like age, sex, ethnicity, marital or credit status in determining rates, the state says. The Law
>> But insurers disagree on how to interpret the statute and how it applies to setting rates when they use risk factors to place policyholders into low-, medium- or high-risk pools.