Los Angeles-based Alliance United Insurance will pay $1.1 million to settle a civil lawsuit alleging it “frequently failed” to respond promptly to consumer auto insurance claims and make its coverage decisions within the legal timeframe.
The payout came following an investigation led by the Los Angeles District Attorney’s (LADA) office and supported by the Ventura County District Attorney’s office. Alliance United Insurance, a Kemper Auto brand, has offices in both counties.
“Insurance companies are quick to collect premiums but also must be swift in investigating and processing claims,” said LADA George Gascón. “Timely investigations are not just a courtesy; they are a legal and ethical duty. Delayed or inadequate investigations can have serious consequences, leaving victims without the support they need to recover from auto accidents.”
Under California law, insurers have up to 15 days to reach out to a policyholder after receiving notice of a claim. They must deny or accept the claim within 40 days.
California Insurance Code allows the commissioner to impose fines of up to $5,000 each time an insurer commits an unfair act or practice on a consumer. If the insurer is found to have done so willfully, fines could double.
Court filings indicate that of the $1.1 million payment, $125,000 will be paid to both the LADA and Venture County District Attorney’s offices to cover the investigative costs. The remaining $850,000 will be split evenly between the offices for civil penalties under California’s unfair competition law.
According to Gascón’s office, the insurer, in this case, specializes in providing non-standard, high-risk auto policies with many of its customers coming from lower-income or under-represented communities.
The LADA’s office said that while Alliance United Insurance did not admit wrongdoing, it did cooperate with investigators and is working to correct the violations.
As part of the judgment, Alliance United has agreed to:
- Require all of its employees handling California claims to complete a mandatory one-hour e-learning course on the California Fair Claims Settlement Practices;
- Update its telephone systems to ensure callers are routed to a claims handler without a claim number;
- “Standardize its voicemail and email information to include the name and telephone number of the claims handler and the name and telephone number of the direct supervisor of the claims handler;”
- “Standardize out-of-office voicemail greetings to include the name of the claims handler and the name and telephone number of a backup claims handler;”
- “Create a dashboard that would allow Alliance United management to track and measure telephonic response metrics to ensure timely and appropriate levels of customer service are provided;”
- Establish a broker assistance program and field inquiries or complaints made by brokers to that program; and
- Conduct annual self-audits, the results of which are to be shared with an executive who supervises the handling of California claims.
A number of other rules will require Alliance United to, either directly or through its broker assistance program, respond to customer queries or complaints within specified timeframes.
Investigators became aware of issues related to Alliance United’s claims handling practices through consumer complaints posted on the Better Business Bureau website and Yelp, LADA’s office said. The insurer has a 1.2-star average ranking from more than 1,200 Yelp reviews, with many people complaining of abruptly canceled policies and waiting weeks or months to receive claims responses.
“As demonstrated by the online consumer complaints, the delays in processing complaints resulted in significant frustration and hardship, especially since a functioning automobile is often essential to California residents,” LADA’s office told Repairer Driven News. “As for calculating a precise exact number of consumers affected, we are unable to answer but the number of consumer complaints suggests that the number was significant.”
It added that the fine was intended as a warning shot for insurers who are tardy in responding to customers.
“The substantial penalties in this case were intended to put insurers on notice that it is important to handle insurance claims promptly and within the timeframes required by law,” it said.
Alliance United did not respond to an RDN query through its parent company, Kemper Auto.
Featured image courtesy of nigelcarse/iStock