Study Finds Possible Steering In Consumer Insurance Sales

Return to Insurance Broker Fraud news on SSEM.COM

A new consumer study finds widespread use of payments to insurance agents who steer customers to certain home and auto insurers, generating the same potential conflicts as those alleged by New York Attorney General Eliot Spitzer in the commercial insurance arena.

The Consumer Federation of America study recently released found "extensive use" of payments to agents for steering customers to certain insurers. It also found agents may be paid additional commissions for selling policies that generate lower levels of claims.

"Both types of contingent payments in wide use entice agents to do the wrong thing," CFA insurance director J. Robert Hunter said in a recent interview.

Some of the largest U.S. home and auto insurers paid relatively high contingency commissions in 2003, the most recent year offering comprehensive data, according to the Consumer Federation. It said those top five are: Federal Insurance, where contingency payments accounted for 2.31 percent of premiums; Travelers C&S, where the payments represented 2.18 percent of premiums; Zurich American, where payments amounted to 1.94 percent of premiums; Allstate Insurance, at 1.74 percent and Hartford Fire, at 1.67 percent.

Contingent payments are more common is some lines of insurance than others, according to the study. It found the payments were most often used in sales of credit insurance, where they accounted for 5.6 percent of premiums, and at companies that specialize in both home and auto insurance.

Since such fees can drive up prices for consumers, the Consumer Federation's insurance director advised retail customers to be cautious when dealing with insurance companies that pay such fees and with independent insurance agents that receive them, saying these agents "work for insurance companies, not consumers."

If you purchased insurance through or were a stockholder in any insurance broker, even if not listed above, please use the form below to contact our law firm for a free consultation to determine if you have a claim as a result of purchasing overpriced insurance.

References