PRINTED IN THE EXPRESS NEWSPAPER, LEXINGTON MISSOURI ON MARCH 8 2007 A Fire and its Aftermath Find a Family and their Insurance Company in a Contentious Struggle• Settlement Occurs 3 Years Later
Mark Lamoree I News Editor
Maurice and Nancy Gash's dispute with Farm Bureau Insurance began on July 9, 2003, when their house caught fire. The house was not destroyed, but did suffer extensive smoke and water damage. The next day, the Gashes filed a claim with Farm Bureau Town and Country Insurance for the damage. . Farm Bureau and the Gashes agree on that much. Almost everything else relating to that case is a matter of dispute. The Gashes say that Farm Bureau defaulted on their obligation as insurance providers. Farm Bureau says that it paid a fair a.'nount, and that the Gashes attempted to defraud the company. The result of that disagreement has been a long and involved series of legal battles, and the creation of a website devoted to presenting the Gash's version of the case. After the Gash's house burned down, Farm Bureau and the Gashes began the process of determining what could be saved, and how much damage had been done. The house had suffered extensive smoke damage, and would require a lot of work to repair. Farm Bureau hired a restoration company, Regency Restoration, to provide an estimate on damage to the house. They said it would take approximately $131,000 to rehabilitate the house. Gash, who owns a development company, provided his own estimate, or $144,000. That estimate included a profit for Gash's company, just as Regency Restoration's did for theirs.
Gash says he was told to begin repairs. He did so, using his own company and financing the work with his savings. He did so expecting to be repaid by Farm Bureau. At the same time, the Gashes and Regency Restoration began separating the contents of the house into two categories: those items that could be cleaned or repaired, and those that could not. Regency Restoration was to begin cleaning those items that could be salvaged. Gash says he then put the items that he had been told were cleanable into a building on the property. He believed that the cleaning work would be done in the building itself. The rest of the contents of the house were placed in a separate storage building.
Months went by, Gash says, and no cleaning was done. In Sept. of that year, Farm Bureau issued a check for $2000 to the Gashes for emergency expenses. They would not see another payment until 2006, when the lawsuit was settled. Six months after the fire, the Gashes filed a complaint against Farm Bureau Insurance with the State of Missouri. Gash says that Regency Restoration never began the cleaning. Another company, ServPro, was hired in its place. What happened next is one of the sources of contention between the two parties.
Gash says that when ServPro arrived to perform an inventory, he believed they wanted to see only those items that were supposed to be cleaned. During that visit, he did not show them the property that he considered unsalvageable because, he says, he did not think that they were there to inventory the unsalvageable property. Robert Bradley, attorney for Farm Bureau, sees it differently. According to Bradley, Gash was using the outbuildings to store property that he previously said had been destroyed. Shortly after the fire, Gash had been asked to supply a list of everything that was damaged in the fire, along with a claim for the cost of those items. Items found to be repairable would later be deducted from the claim. That accusation formed one of the claims underpinning a lawsuit filed against the Gashes by Farm Bureau. They said that Gash was attempting to fraudulently misrepresent his claim. Gash denies that anything of the sort happened, and says that the incident was a result of miscommunication. A year after Farm Bureau filed its suit, the Gashes countersued Farm Bureau for breach of contract.
That suit would not reach the courtroom until 2006. Before either suit was filed, Farm Bureau contacted the Lafayette County Planning and Zoning Board, and the Lafayette County Prosecutor's office. They wanted to know about a long-running dispute between Gash and the County over the zoning ofthat property. At issue was whether or not that dispute would have an effect on the value of the house and property.
Farm Bureau also requested receipts relating to an addition built onto the Gash's home. On Sept. 23, 2004, Farm Bureau filed a suit seeking declaratory judgment against the Gashes. Farm Bureau claimed that the Gashes had misrepresented their claim, and that because of that misrepresentation, the company owed them nothing. In October of 2005, the Gashes filed their countersuit alleging breach of contract by Farm Bureau. Both suits were to be heard in a Lafayette County courtroom on November 8, 2006. That morning, Farm Bureau offered to settle the suit for $125,000. The Gashes accepted that offer. Another dispute followed. Before Farm Bureau issued a check, they wanted the Gashes to sign a form promising not to pursue any claims in the future. The Gashes were not willing to give up the possibility of any future claims, but were willing to drop the lawsuit. Eventually, the two parties reached an agreement. But Gash was still upset by the battle with Farm Bureau's Insurance division. He began a website called farmbureaulies. com. The creation of that site would be the basis for the next legal battle between Gash and Farm Bureau.
The Struggle Between the Gash Family & Farm Bureau Insurance Over House Fire Continues The Acrimony Has Not Been Extinguished
Mark Lamoree I News Editor
The conflict between Maurice and Nancy Gash and Farm Bureau insurance has been Ii long one, but the Gashes claimed a small victory last week. For several years, Gash has been involved in a lawsuit over an insurance claim he and his wife filed after his house burned down in 2003.
The suit itself involved strong claims on both sides. Farm Bureau Town and Country Insurance of Missouri sued Gash, claiming that he intentionally misrepresented the extent of his loss. Gash, in return, filed a suit claiming that Farm Bureau breached its contract by failing to pay for all of the losses against which he was insured. For more than a year, the case worked its way through the court system. On the day of trial, the two parties reached a settlement agreement-or so they thought. That agreement became the subject of additional motions before the court, before finally being settled on February 14. But the conflict was not over. Gash still felt that he had gotten a raw deal, and he wrote about it on a website he titled jarfnbureaulies.com. That site presented Gash's side of the case, and included documents related to the trial filed by both sides. It also includes allegations that Farm Bureau mistreats clients, makes it policy to pay as little as possible in claims, and delays those payments as long as possible. Gash also planned to erect a billboard advertising his site. Farm Bureau was not amused. They filed a motion for a temporary restraining order, claiming that the website was false, defamatory, and designed to interfere with their business. Farm Bureau's complaint was nearly as strongly worded as the website. The site, Farm Bureau's attorneys said, "is rife with false and malicious statements." The statement that attorneys for Farm Bureau wrote a book on how to delay policyholder claims is called, "a . blatant lie."
The complaint goes on to cite several specific claims on jarmbureaulies.com that it considers to be untrue. Among those statements is a claim that the insurance company has not paid the $125,000 agreed upon as a settlement amount. Several lines later, Gash says that the company has in fact made the payment. . "We disagree with the whole site," said Farm Bureau attorney Robert Brady last week.
Richmond-based attorney Jim Rust, who represents the Gashes in this and other matters, responded to the request for a restraining order by saying that his clients were exercising their right to free speech .Gash says that his site has two purposes. The fir-st is to provide assistance to people filing claims with their insurance companies, especially Farm Bureau. The second, Gash says, is to encourage the larger Farm Bureau organization to demand changes from its insurance company. "First and foremost," Rust said in his written response to the motion, "this case is an attempt to place a prior restraint on the plaintiff, Maurice Gash's right to free speech." Prior restraint occurs when the government forbids the publication or broadcast of material. Case law handed down by the United States Supreme Court and other courts imposes strict limits on the use of prior restraint. Typically, prior restraint is allowed only when national security matters are involved. That does not mean, however,
that individuals or companies cannot sue for libel or slander after an item has been published. Rust acknowledged as much in his brief, saying, "Plaintiff in expressing his sentiments over the Internet and in a billboard is well within his constitutional right to express his opinion as to facts that he has observed . . He may very well run the risk of being held to account for his words another day in a civil suit. .. But by a prior restraint he cannot be prohibited from expressing his honestly held opinion of the business conduct of the defendants." Rust went on to paint the contest as an example of a large company attempting to silence a single individual. "This action is an attempt to stifle his criticism, his thought and writing, and to limit his free expression against a large and powerful organization and its subsidiary insurance company."
On Feb. 20, the Lafayette County Associate Circuit Judge Randy Shackelford issued a judgment that seems to side with Rust. While the court made no statement at all regarding the truth or falsehood of the statements on the site, the one page judgment stated, "there has not been sufficient evidence of a willful, malicious, continuing and irreparable injury to Plaintiff's property rights, at least prior to a full hearing on the truth or falsity of defendant's representations, to issue a Temporary Restraining Order," According to Brady, Farm Bureau insurance is considering whether to continue to pursue the case against Gash. For now, though, the website remains available on the World Wide Web.
(This letter to the editor was published in The Odessan, a local paper on, March 8 2007) Farm Bureau problems
After reading the Web site from Mr. and Mrs. Gash, Farmbureaulies.com, I, too, would like to share my story as it parallels directly with theirs.
I, too, had been a member of Farm Bureau for several years. I had insured with them several rental properties and my personal home. At one point my premiums ran a little over $2300 a month due to the large amount of rentals we had.
Like most insureds, the claims over the years were few and far between. Then the big claim hit. In April 2004 I had a four-plex in Odessa damaged by water. All four units were vacated and the nightmare with Farm Bureau began.
A claims agent was sent out to take pictures and was going to get bids for repairs. Time continued to drag while in the meantime I was out the income on four units of rental. To make a long story short, it took four months to receive a partial draw to begin repairs. My fourplex had set four months rotting and molding in the heat and of course, I am still without income on the property. I, too, went to the state level of Farm Bureau due to the fact I could get no action.
It took me almost a year to collect from Farm Bureau and finally complete repairs. This year had been terrible but I took comfort in knowing that I had rental loss coverage in my policy so I could recover. Wrong! I filed for my rental loss and guess what. Denied. I, too, filed a complaint with the state insurance commission that proved worthless. I then also filed suit against Farm Bureau. Within a week of filing the suit my insurance was canceled. Not only was the insurance on JSB Properties, the company filing suit, canceled but also the insurance held by Whitney Properties, a company owned with my husband. Whitney Properties had nothing to do with the suit. Here I now sit with rental property spread out everywhere, including my personal home, with the realization that in a short matter of time, none of it will be insured. Never having been canceled before, I, too, did not realize that I had now become hard to insure with another company. This is just another tactic that Farm Bureau uses in order to get you to settle for less, which is exactly what I did. Something is better than nothing. For what it is worth, please heed my warning. If you are a member of Farm Bureau, cancel! It does not matter how long you have been a member or how much you like your agent, they are not in control, or how reasonably priced you think they are, get out! I would like to applaud the Gashes for their effort. Farm Bureau Lies. Judy
Farm Bureaus Incomplete investigation of claim leads to verdict against insurer on 11/6/2003
Charles Emerick
An insurance company that denied a client's claim and accused him of being involved in the theft and destruction of his own pickup breached their contract, a Jackson County jury determined. When Jason Blakeman awoke in his Richmond, Mo., home on the morning of Aug. 19, 2002, he discovered his 2001 Ford Ranger Pickup he had been leasing for a year and a half was missing. Ten days later, it was found completely burned in a field near Richmond, according to Blakeman's Kansas City attorney William L. Carr. A claim filed with Farm Bureau Town and County Insurance was denied because the company believed Blakeman was behind the theft and burning. The Ranger was equipped with an antitheft device that makes it very difficult to start without its computer coded key, which Blakeman had in his possession. When Farm Bureau denied his claim and alleged that he played a role in the trucks burning, Blakeman sued for cost of the truck, vexatious penalties and attorney's fees. At trial, Blakeman was helped when defense expert Michael Herrold, an automotive forensics expert from Liberty, testified that while the antitheft system is difficult to crack, the vehicle is not impossible to steal. And according to Carr, Farm Bureau's investigation into the theft and burning was incomplete. The problem was that they were unreasonable in the way they investigated the claim, Carr said. We provided them with information soon after the loss and they didn't follow up on that information at all. Farm Bureau ignored the fact that five other trucks had been stolen and burned in the Richmond area in the six months prior to the theft of Blakeman's truck. We indicated that something was going on and they didn't follow up on that, Carr said. They just denied the claim. As a result, the jury returned a verdict awarding 100 percent of the plaintiff's demand, including $22,270 for the pickup, $4,072 for vexatious penalties and $18,132.50 in attorney's fees. The verdict also included $19,950 for towing and storage charges bringing the total to $64,424.50. In addition, Judge Michael W. Manners added $10,639.44 in prejudgment interest.
(Kansas City Star, The (MO)
December 10, 2006
Section: Photo
Page: A1
Complaints burn customers trust
MIKE CASEY
INSURANCE COMPANIES Service or shenanigans?
PART ONE OF THREE
Tracy Cooper couldn't believe her health insurer tried to stick her with a $16,000 hospital bill. The company said her insurance didn't cover that hospital.
Cooper, however, didn't have any choice -- she was unconscious. Paramedics had rushed the Shawnee woman to the hospital they felt offered the best treatment.
Last year, a hailstorm bombarded Jim Weakley's century-old home in Greenwood, Ind. But his insurer wouldn't cover the roof damage.
"I was getting hosed big time," Weakley complained.
Charles Sorg of Gahanna, Ohio, spent 30 hours trying to get an auto insurer to pay $500 for his damaged pickup.
"People will just give up," he said. "Some will die waiting."
But Cooper, Weakley and Sorg are among hundreds of thousands of angry consumers all across America who didn't give up -- they lodged complaints with state insurance regulators.
The Kansas City Star spent 11 months examining insurance problems, including an analysis of a national database with more than 600,000 such complaints filed from 2003 through 2005. In all, the newspaper analyzed nearly 35 million records. Experts said it's the first time a newspaper has done such a comprehensive national database analysis.
The analysis provided a window into consumers frustrations with unreturned phone calls, senseless red tape or horror stories over claims handling. Those hassles come at an emotionally wrenching time, when many people are reeling from accidents, natural disasters or even life-threatening illnesses.
And when it comes to complaints, the newspaper found that insurance companies don't stack up favorably compared with other financial services such as banks or stock brokerages.
Upset insurance customers slug it out daily with billion-dollar companies over thousands of dollars or mere pennies. They filed 246,000 complaints over auto insurance, 133,000 over group health insurance and 70,000 over homeowner's coverage during the time of the analysis.
Most of the time, consumers were right. The analysis showed that state insurance regulators sided with consumers 60 percent of the time. The regulators assistance ranged from simply providing consumers with advice to actually helping them with their bills.
Cooper, who was knocked out during a softball game, got her $16,000 hospital bill waived. Weakley got around $27,000 for his roof and other repairs. Sorg got $500 to fix his pickup.
Some consumers are even more stubborn. Kathleen Cain, a Topeka pediatrician, collected 19 cents from a health insurer for interest on a late payment. "It's just the principle of the thing," Cain explained.
Consumer advocates say the newspaper's findings show that far too many insurance companies place profits ahead of consumers interests.
"The problem is there," said Bob Hunter, director of insurance for the Consumer Federation of America, "and your numbers show it." Hunter and other consumer advocates suspect thousands of additional complaints go unreported.
An insurance industry spokesman, however, downplayed the complaint data's significance.
"Only an infinitesimally small number of claims are something that rise to that level (of complaints)," said Robert Hartwig, chief economist of the Insurance Information Institute. Hartwig said that insurers are doing a good job overall and that many disputes arise because consumers don't understand their policies or don't have the proper coverage.
To be sure, insurance companies handle millions of claims fairly and promptly, although the industry organization says it does not track exactly how many claims are filed each year. No clear trend for complaints was discernible from the 2003-2005 data reviewed by The Star. Complaints were up 3 percent in 2004, but dropped 11 percent in 2005. Complaint data for 2006 are not complete.
But state insurance regulators last year received nearly six times more complaints than federal bank inspectors, who deal with problems involving bounced check fees or mortgage payments. Insurance regulators also got almost 10 times more complaints than securities regulators, who deal with problems involving mutual funds and unwanted e-mail stock tips.
To further evaluate insurers, The Star calculated complaint ratios for the 2,400 largest companies in auto, home, life, annuities, group health and individual health coverage.
The Star calculated the ratios by totaling all of the complaints and premiums for a particular type of insurance.
Then the newspaper figured each company's percentage of those complaints and premiums. Those percentages were used to arrive at a complaint ratio for each company.
Companies whose ratios were above 1 performed worse than their competitors, and companies with ratios below 1 performed better.
The complaint data for the national analysis came from the Web site of the Kansas City-based National Association of Insurance Commissioners, which compiles complaint data from the states. But the data have limitations. Some states do not send all of their complaints to the association.
Among the nation's 20 largest insurance companies for auto, group health and home, the analysis found:
For auto insurance, Allstate Insurance Co. of Northbrook, Ill., the "Good Hands" people, scored the highest complaint ratio.
For group health insurance, two United HealthCare Insurance Co. affiliates -- Oxford Health Plans N.Y. Inc. and United HealthCare Insurance Co. of New York -- tallied the highest complaint ratios.
For homeowner's insurance, Farmers Insurance Exchange of Los Angeles (not to be confused with the local Farmers Insurance) had the highest complaint ratio. Farmers also had the most complaints for using credit histories to help set insurance rates, which critics contend is discriminatory.
The ratios showed significant variations, for example, between the nation's two largest auto insurers. Allstate had a complaint ratio of 1.33, while the State Farm Mutual Automobile Insurance Co. had a complaint ratio of only 0.42.
"That's a big difference," said Dan Anderson, an insurance professor at the University of Wisconsin-Madison. "Obviously, State Farm does a better job."
Allstate spokesman Mike Siemienas said Allstate does not comment on matters involving competitors.
But he did say that "the total number of complaints filed against Allstate make up less than 1 percent of our customer base."
What's at the top of the list of consumer gripes with most insurance companies? Taking too long to settle claims, The Star found. Consumers filed 131,000 complaints over claim delays. Complaints over claim denials were second with 119,000. Low settlements came in third with 91,000.
The money at stake in such disputes can be significant and touches people in all walks of life. Insurance is a $1 trillion a year industry, covering just about everything from underground coal mines to high-flying jets.
There are more than 330 million life insurance policies in the United States, plus policies covering 175 million vehicles from Audis to Zephyrs. About 7 cents of every dollar spent by Americans goes to insurance, more than is spent on entertainment or clothing.
It's also profitable. Insurers profits last year totaled about $77 billion. That's what many disputes between insurers and consumers come down to -- who gets what.
"It's always about the money," said Alessandro Iuppa, Maine's superintendent of insurance and president of the National Association of Insurance Commissioners.
Auto insurance
Allstate Insurance had the most overall complaints involving claims handling issues with 15,500. That's 35 percent more than State Farm, the insurer with the next-highest number of such complaints. Its total premiums are actually much larger than Allstate s.
Allstate officials said they get many complaints because their company is so big.
"Our goal is complete customer satisfaction, but there is not an industry out there that doesn't have customers who are unhappy at one time or another," Siemienas said. "We are the second-largest personal lines property and casualty insurer in the country."
Some attorneys who ve sued Allstate weren't surprised by the findings.
"They're the Good Hands people for the pittance that they offer you," attorney Dale Golden said during a court hearing last year in Kentucky. "If not you can forget about that, they're going to put the boxing gloves on those good hands, and they're going to take advantage and batter victims ..."
To support his argument, Golden showed the court a slide that an Allstate consultant, McKinsey & Co., prepared for the insurer. The slide actually referred to the "Good Hands vs. the Boxing Gloves" treatment.
Allstate hired McKinsey to help develop new claims handling practices, some of which the insurer adopted in 1995. Allstate said the new system delivers prompt and fair payments and weeds out fraudulent claims.
But the pending Kentucky lawsuit alleges that Allstate actually revised its claims handling practices to low-ball consumers in order to boost profits.
Allstate denied those allegations.
"Claimants who do not accept a reasonable amount in settlement of their claims, but insist on more than they are entitled to, can decide to initiate litigation," the company said in a statement. "Claimants who do so will have to contend with a vigorous and appropriate defense that Allstate affords its insureds."
Two pending lawsuits filed in New Mexico also raise allegations over claims handling. "It's no holds barred," said plaintiff's attorney David Berardinelli. "It's aggressive litigation tactics."
Allstate defended its practices, saying it pays claims promptly and fairly.
"When claims did proceed through to trial, juries were likely to render verdicts consistent with Allstate's evaluations," the company said.
James Anders of Brownsburg, Ind., is going to court to find out if that's true.
On a January evening last year, Anders waited at a red light in Indianapolis when another vehicle rear-ended his car. Fortunately for Anders, he had a witness -- an Indiana state trooper next to Anders car. The trooper cited the other driver.
Allstate just happened to insure both drivers involved in the accident.
Anders filed a claim against the other driver's policy. In a letter to Anders, Allstate said it would not pay his medical expenses beyond $200 for his initial treatment, saying the accident was at such a low speed that Anders couldn't have been seriously injured. However, doctors found other problems, and his medical bills for shoulder surgery totaled about $25,000.
Anders complained to the Indiana Department of Insurance. But it ruled that, under state law, it couldn't order Allstate to pay more and closed the case.
He then sued the other driver, who through a lawyer provided by Allstate has denied responsibility for the accident and is contesting the medical claim. That driver's attorney argues the injuries could have stemmed from a pre-existing condition.
"Now, every time I see the commercials about the Good Hands people," Anders said, "it makes me sick."
His attorney also found the situation strange, considering a trooper saw the accident. "That happens 1 in 10,000 times," said Indianapolis attorney Don Levenhagen.
Allstate's Siemienas said, "We do investigate and evaluate each claim on its own individual merits and will only pay what a claim is worth."
Health insurance
Few political debates in the last decade have festered more than the one over affordable health insurance for average Americans.
Even when they have health insurance, lots of consumers still aren't happy. The second-highest number of overall complaints in The Star's analysis involved disputes over group health coverage.
Among the 20 largest group insurers, Oxford Health Plans N.Y. Inc. and United HealthCare Insurance Co. of New York had the highest complaint ratios -- more than five and three times above the median respectively. Each also had more than 1,000 complaints against it for claim delays and low settlements from 2003 through 2005.
UnitedHealthcare, headquartered in Minneapolis, said its affiliates strive to be the best health companies in the country and are always looking for ways to improve their performances. The company said that complaints represent a small fraction of all claims, but that it takes them seriously and works closely with regulators to address customer concerns.
Sometimes United HealthCare has been at odds with regulators. Two years ago, North Carolina officials leveled their highest fine ever -- $2.2 million -- against United HealthCare Insurance Co. and UnitedHealthcare of North Carolina Inc. after receiving complaints about incorrect claims payments, improper claims denials and other issues. The two health insurers did not admit any wrongdoing.
Health insurance disputes sometimes have far more serious implications than an unpaid bill.
Last year, Melissa and Benjamin Halpern's newborn son, Joshua, needed a special formula because of severe allergies to other formulas and breast milk.
"If he didn't get the formula, he would die," said Melissa Halpern of Plano, Texas, "and they (United HealthCare) said, No. We won't pay for it. "
She estimated that the couple spent about $22,000 of their own money for the formula. Joshua recovered and is doing fine now.
Eventually, they switched to another insurance company that pays for the formula. They also filed a complaint against United HealthCare with the Texas Department of Insurance.
In September 2005, United HealthCare told Texas regulators that because it had received new information, it would pay the Halperns.
But no one told the Halperns -- until The Star did earlier this fall.
"You d think they d send a letter," Halpern said. "I m extremely surprised United HealthCare and the Texas Department of Insurance wouldn't have followed through."
State records showed that the insurance department sent an e-mail to the family, but the e-mail never went to the Halperns. Texas insurance officials said they made a mistake and took steps to correct the problem.
As for the Halperns, Melissa said they recently received $13,000 from United HealthCare for some of the formula bills.
Home insurance
Homeowner's insurance companies sometimes use credit histories to develop a "score" to help set premiums, reduce bad risks and predict future claims. But only about one-third of consumers are even aware of it, according to a U.S. Government Accountability Office report last year.
Despite that lack of knowledge, The Star's analysis found that policyholders had filed 1,450 complaints nationwide over credit scoring in the last three years.
Of those complaints, Farmers Insurance Exchange of Los Angeles topped the list with 147 for all kinds of insurance. Three of Farmers other companies, including its Overland Park operations, are among the top five for similar complaints. Those companies accounted for more than a quarter of all the complaints involving credit scoring.
Farmers Insurance Exchange also had the highest complaint ratio among the 20 largest home insurers. In all, consumers filed more than 1,000 complaints against Farmers Insurance Exchange over claim delays, low-ball offers and other issues.
The complaints represent less than 1 percent of its policyholders, Farmers said, and it's striving to improve customer service.
A Farmers Group Inc. vice president attributed the higher credit-scoring complaints to doing a better job of informing policyholders about its use of the practice than its competitors.
"We went out of our way to make sure customers know that their credit histories were involved with their rates," Bill Martin said. "We are the consumer-friendly user of this practice."
Not all of Farmers home insurance customers agree.
Dee Anderson of Frisco, Texas, complained in 2004 to state regulators after Farmers downgraded his credit standing one notch and raised his premiums 8 percent. Anderson didn't understand the changes.
"My payment history with all financial institutions is perfect," wrote Anderson, who switched insurers. Anderson is also concerned about the effect of credit scoring on people less well off.
Indeed, consumer groups call credit scoring the "new redlining," a discriminatory practice that penalizes the poor and minorities in certain neighborhoods.
"People at the bottom of the economic ladder are going to have the hardest time getting the insurance they need," said Norma Garcia, a Consumers Union attorney.
Martin, however, said that credit scoring allows insurance companies to offer bigger discounts because they can predict losses better for home and auto insurance. He maintained that insurance scoring actually helps minorities who have good credit. Farmers and the insurance industry noted they do not consider race or income in credit scores because, they say, they don't collect such data.
Credit scoring, however, is drawing national scrutiny. At Congress direction, the Federal Trade Commission and the Federal Reserve Board are studying its impact on minorities being able to obtain and afford insurance.
Stay after them
A review of complaints from disgruntled consumers across the country makes one thing clear: If you're upset with how an insurance company is treating you, and you're convinced you're right, don't give up the fight.
Though insurance companies may have more money than you, persistence pays off.
Luther "Jack" Brasuell of Van Buren, Ark., has fought Connecticut General Life Insurance Co. for more than two years over paying for dental implants following cancer treatments.
Brasuell complained that the insurer, better known as Cigna, approved the implants and then balked at paying about $11,500. Cigna officials declined to comment on the dispute, citing patient privacy laws.
Because he had insurance through a former employer based in Indiana, Brasuell had to take his complaint to that state. Over the months, his file grew to more than half an inch thick.
Eventually, Cigna paid about $4,400, although Brasuell is still fighting over the rest of the bills.
"The main thing I learned was how to fight: Read your policy, talk to people, go to the insurance commissioner and be persistent," advised the 62-year-old former college instructor. "Just stay after them, stay after them."
Part 1 Inside today
Tips for buying insurance. A18-20
Ranking the companies. A21
Part 2 Coming tomorrow
Insurance agent misconduct and fraud is widespread and getting worse.
Part 3 Coming TUESday
Who's watching out for you? Insurance oversight often is lacking.
@ Go to KansasCity.com for more, including a searchable database that rates hundreds of insurance companies.
While the 600,000 in total complaints may seem small compared to the millions of policyholders nationwide, experts suspect that there are thousands more going unreported.
Although they were different accidents hundreds of miles apart, both men said they had the same Allstate experience: They waited and waited for a settlement before finally complaining to their state insurance departments.
"We d lost our only child. You're trying to tell people we ll work with you to pay the bills. They're threatening you with collection, and the insurance company is ignoring you."
-- Christa Mazur
"I can't figure out how credit reports have anything to do with how I keep my home."
-- Carole Grant of Fort Worth, Texas
To reach Mike Casey, call (816) 234-4305 or send e-mail to mcasey@kcstar.com.
Methodology
The Kansas City Star used a computer program this year to obtain nearly 35 million records about consumer complaints from the public Web site of the National Association of Insurance Commissioners.
The Kansas City-based association receives complaint information from the states and presents the information on its Web site to inform consumers.
The Star analyzed records about complaints and premiums for 2,400 companies, reasons for consumer complaints, complaints by type of insurance and state regulators' decisions.
National analysis
The newspaper analyzed the NAIC records from 2003 to 2005. The newspaper examined data provided by Kansas and Missouri regulators that provided more details about complaints than the NAIC records. The paper examined insurance companies' complaint histories for specific kinds of insurance.
For its national analysis, the newspaper reviewed the complaint history of companies with at least $3 million in premiums for each type of insurance. The complaint and premium totals for those companies represented 98 percent of all complaints and 99 percent of all premiums.
The Star followed the NAIC's methodology in its analysis for determining complaint ratios by only counting complaints found in favor of consumers and eliminating those found in favor of the company. About 60 percent of regulators' decisions favored consumers.
The NAIC constantly updates its Web site, and some companies' total complaints and complaint ratios may be different now than at the time the newspaper obtained its information.
The Star received advice from Myles Gartland, an economics professor at Rockhurst University; Bob Waris, an instructor in the Bloch School of Business and Public Administration at the University of Missouri-Kansas City; and David Herzog, the academic adviser to the National Institute for Computer-Assisted Reporting/Investigative Reporters and Editors, and an assistant professor of journalism at the University of Missouri-Columbia.
Local analysis
The Star's analysis examined Kansas and Missouri insurers with at least one complaint and more than $1 in premiums for the period. For the Kansas analysis, complaint ratios reflect the same protocols as the NAIC national analysis.
For Missouri, The Star used complaint numbers and premiums supplied by the state. In 2005, Missouri changed how it made complaints public. For complaint ratios, Missouri counts all complaints, so The Star did, too.
Photos (7, color)
NOAH MUSSER; CHRIS OBERHOLTZ THE KANSAS CITY STAR
.
(Kansas City Star, The (MO)
December 11, 2006
Section: Photo
Page: 1
Only wreckage remains when agents breach trust
You think you're covered? You might be surprised, and at the worst possible time.
MARK MORRIS
UNMAPPED FIELD NewsML_NewsItem_NewsManagement_Property_Project = "Insurance"
INSURANCE COMPLAINTS Rogue agents can cost us big money
You think you're covered? You might be surprised, and at the worst possible time.
After an accident at work that could have killed him, Gary Davis of De Soto discovered that he had purchased bogus health insurance policies for his auto repair shop from an agent who shouldn't have been licensed.
After she turned 94 years old, Lina Dickerson of St. Louis realized her agent had duped her out of her life's savings as a teacher.
And after her van crashed, single mother Donalda Martinez of Garden City, Kan., learned she had no coverage because her agent had put her premiums in his pockets.
Unfortunately, thousands of Americans are victimized just like Davis, Dickerson and Martinez. Insurance agent misconduct and fraud is widespread and getting worse, according to experts interviewed by The Kansas City Star.
Among the most common abuses: agents who steal a client's premiums by failing to forward them to the insurance company. Bad agents also sell unlicensed products or coverage that is unsuitable. And some are just crooks, no better than a policyholder who commits insurance fraud.
"A disturbing and growing number (of agents) won't hesitate to bilk their own clients in order to pad their own lifestyle or bail out an agency that's in trouble," said James Quiggle, a spokesman for the Coalition Against Insurance Fraud, a nationwide advocacy group supported by insurance companies, regulators and consumer groups. "It's a front-and-center problem for regulators all over the country."
To be sure, most agents are honest, according to experts who have studied the insurance industry.
"The great majority are highly competent and ethical agents," said Jerry Todd, a risk management professor at St. Mary's University in San Antonio, "but consumers need to be aware of the potential for fraud and deal with reputable, professional agents they can trust."
But criminal background checks for agents are spotty. Kansas performs them only when a prospective agent files for a license, not on renewals. Missouri never checks.
And not all states require insurance companies to report agent fraud to authorities when they do find it. Kansas and 10 other states have no fraud reporting requirements at all, according to the Coalition Against Insurance Fraud. At least nine other states, Missouri among them, require reporting only when a customer files a fraudulent claim.
As a result, finding statistics on agent fraud is nearly impossible.
The Star's database analysis of millions of insurance records, first reported Sunday, found that consumers filed 9,718 complaints with state regulators between 2003 and 2005 specifically about how their agents handled policies or premiums. However, the data collected by the National Association of Insurance Commissioners, based in Kansas City, fail to disclose how many of those complaints directly involved fraud.
"There are no significant data or formal studies on the subject and virtually nothing in journals of either academicians or insurance professionals," according to a 2000 study published by four university professors in Texas.
Six years later, the Insurance Information Institute -- the industry's statistical clearinghouse -- says it also has no reliable information on bad agents.
But The Star found in interviews that agent fraud is on the upswing, possibly because of a flood of new agents. In the last five years alone, the number of agents selling insurance increased by 58,640, according to federal labor statistics.
Utah authorities, for example, convicted 42 insurance agents of fraud last year, up from just one agent in 1995. In Kansas, Insurance Commissioner Sandy Praeger also is seeing an increase.
"Not only is consumer fraud on the rise, but there is also an increasing number of cases being investigated concerning agent fraud," said Praeger, whose fraud unit has opened 1,042 new investigations since 2004.
Insurance now ranks fifth on a list of industries most frequently investigated by members of the Association of Certified Fraud Examiners. That's up one notch from the association's previous report in 2004. Agents probably were involved in more than half of the insurance scams examined, according to John Warren, the study's author.
All of this comes at a time insurance agents are facing serious credibility issues. A Harris Interactive poll released in May found that only 9 percent of U.S. adults "completely trust" agents to give them good advice. That places them below mechanics, lawyers and six other professional groups.
Still, the number of agents disciplined by state authorities each year is small compared with the number of agents licensed. Since 2003, Missouri has filed disciplinary actions against only 67 agents, while licensing 102,242 to sell policies. Over the same period, Kansas disciplined 184 agents, while licensing 77,181.
Nationwide, state insurance departments discipline about 5,000 agents a year.
Experts, however, say the disciplinary numbers are deceptively low because insurance fraud is easier to commit than detect. And prosecutors often are reluctant to launch expensive financial investigations that can take years to untangle.
"If I had a child who told me he wanted to go into a life of crime, I d advise him to go into insurance fraud," said Barry Zalma, a California lawyer and insurance fraud consultant. "It's fairly easy and the chance of prosecution is low. It's a lot easier than using a gun to steal money from the 7-Eleven."
Dark secrets
If the local agent who peddles an insurance policy has a dark secret that regulators could have detected through a simple criminal background check, a consumer scarcely stands a chance.
Consider the case of Gary Davis.
Davis literally had no idea what was about to hit him as he worked at Leavenworth Automotive Services in August 2001. An employee dropped a truck tire that struck Davis, now 58, in the back. He needed costly surgery to repair a bowel injury that, if left untreated, was life threatening.
At least Davis had health insurance -- or so he thought.
He d purchased a new health plan for himself and his employees from TRG Marketing of Greenwood, Ind., which saved his company about $400 a month.
What Davis didn't fully understand, until The Star told him, was that the three men who sold him the plan had something to hide. The top two officers of TRG later acknowledged in court that the health plan was a scam. And the Kansas insurance agent involved, Gregory Strand, is a convicted felon, which Kansas regulators didn't know.
While Davis prepared for surgery, TRG board chairman Carmelo Zanfei spent his and other customers premiums on a luxury trip to Italy with his family. The highlight? A three-night, $4,147 stay at a magnificent hotel in Venice near St. Mark's Square. While there, Zanfei also spent $1,230 in health premiums on a blown-glass knickknack for his office.
Zanfei wasn't the only TRG officer living luxuriously off of customers premiums. Federal authorities allege that Chief Executive Officer William P. Crouse spent $546,732 in insurance company money to buy a five-bedroom home.
Davis emerged from successful surgery in September 2001. But TRG never paid a dime of his $15,000 in medical expenses.
"They kept stringing us along, saying it was slow paperwork," Davis recalled.
Davis worked seven days a week, 12 hours a day to pay hospital bills and doctors. He said the physical and financial strain contributed to his decision this April to sell his business, which he had owned since 1982.
Crouse pleaded guilty in October to seven felony counts of embezzlement and money laundering in federal court in Indiana after being accused of stealing about $3 million from at least 7,000 TRG customers. Zanfei is facing trial on similar charges next week. Both already are serving prison time in Florida after pleading guilty to racketeering.
William H. Dazey, an attorney representing Zanfei, declined to comment other than to note that his client has pleaded not guilty. But he added, "These are the kinds of cases where people, honest to God, don't think they did anything wrong."
Kansas fined Strand, the agent who sold Davis the policy, $1,000 for failing to "research the program adequately" and relying too much on TRG's representations that it was a "safe and affordable source of health insurance."
But it wasn't until The Star made state regulators aware of Strand's felony conviction that they revoked his license. While Kansas performs criminal background checks on new applicants for agent licenses, it requires agents to self-report any subsequent convictions.
"Mr. Strand's conviction was not something we were aware of," Kansas insurance spokeswoman Charlene Bailey said. "We find this very disturbing and we will act on it immediately."
Missouri, where Strand holds a nonresident license, also is investigating.
Strand said he began selling the health plan after seeing an ad in an insurance magazine. "I figured an outfit that big had already done all their due diligence," he said.
Strand also said he remembers writing a letter to Kansas insurance regulators from his prison cell, notifying them about his felony. However, he said he never received a response. Kansas authorities said they had no record of any such letter.
For his part, Davis said he never would have purchased the health plan if he had known about the conviction 11 years ago that landed Strand on the state's sex offender registry.
"I don't want anybody like that around my family," Davis said. "He had the kids insured. I had two daughters."
Too trusting
With extraordinary access to intimate personal and financial information, bad agents can spend years nurturing confidence and homing in on an elderly client's assets. And they can do it all under the radar of the state agencies supposedly regulating them.
That's what happened to 94-year-old Lina Dickerson, a proper but petite figure at only 4 feet 11 inches tall. She d taught in St. Louis public schools for nearly 50 years and was treasurer of the Sunday school at All Saints Episcopal Church for 70 years.
"Every time she came in she was a perfect lady, with a hat and gloves on," recalled William McDowell, a Clayton, Mo., lawyer who handled her estate.
But Dickerson had a blind spot for insurance agent Todd McGrath, who d done her taxes for years.
"He really won her over," said Dickerson's longtime friend, Patricia Heeter. "He would call and see how she was and come by. He was good."
In December 1995, McGrath persuaded the then 87-year-old Dickerson to pull $338,000 from a money market account and purchase a long-term investment that often is considered risky for the elderly.
When Dickerson was 93, McGrath asked her to loan him $306,000 at zero percent interest for 20 years. Moreover, the promissory note included this provision: "This note shall be deemed fully paid upon the death of the holder."
FBI agents and senior citizen advocates later explained to Dickerson how McGrath had taken her money.
Dickerson wanted to testify against McGrath. But she died just a month before he pleaded guilty in October 2003. McGrath at his sentencing agreed to pay $306,000 in restitution to the beneficiaries of Dickerson's estate.
But the Missouri Department of Insurance only learned of McGrath's crimes from an FBI agent after he was sentenced, The Star found. McGrath already was at a federal prison camp in Yankton, S.D., when he received his insurance license revocation. Missouri regulators depend on insurance agents to notify them of any pending criminal case against them. But McGrath never called.
Even when the system works, and a bad agent is successfully bounced by regulators, trusting consumers can lose money if they fail to check an agent's background. That oversight cost Joyce Tavernaro of Tecumseh, Kan., $53,000.
Disabled in a roll-over accident, Tavernaro was looking for a cheaper supplemental health policy in September 2003 when she met Wilbert House.
House was a smooth talker who flashed what he said was his insurance license when he promised to help her get coverage.
Tavernaro should have taken a closer look -- that license had been revoked the previous March because of a string of theft convictions.
She wrote House $3,000 in premium checks. Soon he called with the good news that she was covered. Then he asked her for a loan to bail out his struggling home repair business, and she gave him $50,000.
"He tried to help me out, so I felt a little obligated," she explained.
This March, House was sentenced to 11 months in prison for felony theft for the insurance policy that never arrived. Tavernaro obtained a civil judgment against him for the $50,000 loan.
On Aug. 25, Shawnee County authorities charged House in an unrelated case with six misdemeanor counts of theft and using deceptive commercial practices.
Tavernaro was devastated to learn that a quick call to the state insurance department would have revealed that House no longer carried a valid license. If she had made that call, she admits she never would have given him her money.
"Check out people's credentials," Tavernaro said.
Pocketing premiums
The Star found that the most common way agents go bad is by collecting premiums from a customer and not forwarding them to the insurance company. It's called "pocketing."
Insurance regulators files are brimming with customers from across the United States who paid their premiums in good faith, then found out during a crisis that they were uninsured.
That's what happened to Donalda Martinez of Garden City, Kan.
Nine days after an agent accepted her premium, Martinez, a struggling single mother of four, slid through a stop sign on a snowy day. She crashed into another vehicle and totaled her 1994 Ford Aerostar, which still sits in her driveway as a grim reminder.
But when she called what she thought was her insurance company, she learned she wasn't covered.
Months before, the company had severed its relationship with the agent.
"The agent kept telling me it was going to be taken care of, but nothing ever happened," Martinez said.
By the time Martinez complained, Kansas insurance regulators already were investigating seven reports that the agent either had misrepresented coverage or had failed to forward premium payments to insurance companies.
After the owner of the other vehicle sued Martinez, she had to pay $4,000 in damages. Today, she ll only buy insurance directly from insurance companies, not an agent.
Kansas regulators revoked the license of Martinez's auto insurance agent in 2003, after ruling that he had "misappropriated" her premiums.
Martinez said her experience can serve as a warning to consumers everywhere. She had worked with her agent for a couple of years before he took her money and delivered nothing in return.
"You're driving around and you believe you have insurance," Martinez said. "You have a card, but you don't have crap."
The story so far
On Sunday, The Star's database analysis of nearly 35 million insurance records revealed how 2,400 of the largest companies rated in consumer complaints for auto, home and health coverage.
@ Go to KansasCity.com for Sunday's installment and a searchable database rating the insurance companies.
"They kept stringing us along, saying it was slow paperwork."
-- Gary Davis, after emerging from surgery in September 2001 and found his insurer never paid a dime of his $15,000 medical expenses.
Even when the system works, and a bad agent is successfully bounced by regulators, trusting consumers can lose money if they fail to check an agent's background. That oversight cost Joyce Tavernaro of Tecumseh, Kan., $53,000.
"You're driving around and you believe you have insurance. You have a card, but you don't have crap."
-- Donalda Martinez of Garden City, Kan.
To contact Mark Morris, call (816) 234-4310 or send e-mail to mmorris@kcstar.com.
part two of THREE
Only wreckage remains when insurance agents breach trust
No Art
(Kansas City Star, The (MO)
December 12, 2006
Section: Photo
Page: A1
Oversight is all too often an oversight
DAVID KLEPPER
INSURANCE COMPLAINTS Regulators enjoy a cozy relationship with the industry
U.S. insurance companies boast assets of $5.6 trillion. They benefit from virtually no federal oversight. And the state officials who do regulate insurance companies often are drawn from the industry they police.
That's how insurance regulation works in America. But too often it may not be working for you.
Insurance companies have far deeper pockets, and far greater political pull, than consumers might ever dream of -- and their influence is considerable.
The reason is simple. Big money is at stake. Insurance premiums now equal roughly 10 percent of the U.S. gross domestic product.
"The industry gets what it wants across the country," said Doug Heller, director of the Foundation for Taxpayer and Consumer Rights, a non-profit California-based consumer advocacy group.
The Kansas City Star found:
Regulators and insurance executives routinely trade jobs through a "revolving door."
More than half of the 35 insurance commissioners who left their jobs in the last three years got new jobs with the insurance industry, law firms, or lobbying groups that work for it, according to an informal nationwide survey by the newspaper. One-third of the new commissioners replacements came from the insurance field.
Insurance companies invest millions of dollars attempting to influence regulators and lawmakers.
Insurers spent $119 million lobbying federal officials in 2005 -- more than the auto industry and commercial banking combined. Only pharmaceutical companies spent more money on lobbying than insurance companies. Insurance also regularly ranks in the top 10 of industry campaign contributors, giving candidates more than $230 million since 1999.
Elected state insurance commissioners tend to be more consumer-friendly than appointed ones.
The newspaper's database analysis showed, for example, that insurance complaints filed in Washington state -- where voters choose commissioners -- are twice as likely to be decided in favor of consumers as those in Maryland, where politicians pick commissioners.
Unfortunately for consumers in 39 states, including Missouri, insurance commissioners are appointed. In Kansas and only 10 other states, commissioners are elected.
Insurance industry spokesmen, lawmakers and regulators all said that lobbying and campaign contributions are just the political reality in America today. They also dispute that the revolving door between state insurance commission offices and corporate boardrooms offers any more influence than that enjoyed by other regulated businesses.
"There are times when I wish they (the industry) would be much more active," said Marc Racicot, the president of the American Insurance Association, who once served as Montana's governor and chairman of the Republican National Committee and President Bush's re-election campaign.
But the influence big money can buy occasionally tempts big-time corruption. In Louisiana, three consecutive insurance commissioners went to prison in recent years.
Yet most of the time, regulators and lawmakers do the industry's bidding in ways that are perfectly legal.
State Sen. James Seward of New York, chairman of the insurance committee, sponsored bills giving insurers tax credits, easier ways to reorganize their corporate structure, and a proposal that would weaken state oversight of auto insurance rates. Seward has received $500,000 in contributions from insurance interests.
Former California Commissioner Chuck Quackenbush allowed insurers to avoid investigations and fines for underpaying policyholders after a major earthquake. The insurers gave Quackenbush free TV commercials and made donations to charities that included his son's football camp.
Terri Vaughan, former Iowa insurance commissioner, approved a company's reorganization, which enabled it to become a public company. The company, Principal Financial, later gave Vaughan a seat on its board of directors. Her old boss, Iowa Gov. Tom Vilsack, took contributions from company insiders, including more than $40,000 from a former chairman.
Seward did not return repeated telephone calls for comment. Quackenbush said he didn't do anything wrong but his political opponents forced his resignation. Vaughan stood by her decision.
Local politicians also benefit from the close relationships. Insurance interests contributed $1 million to Kansas lawmakers in the past 10 years, and $4 million to Missouri lawmakers.
During that time, Missouri lawmakers passed industry-friendly bills to put new limits on medical malpractice lawsuits and to restrict public access to insurance complaints. They also proposed to shield insurers from having to disclose illegal behavior to regulators and even the courts.
The last bill was defeated after critics said it amounted to a "get-out-of-jail free" card for insurers. But the proposal's sponsor, state Sen. John Loudon, defended the measure. Loudon, a licensed insurance agent, has received more than $20,000 from insurance interests during his political career. He says his bill was needed to protect insurers from frivolous lawsuits.
"Some people tried to immediately say we're just trying to hide stuff," said Loudon, a St. Louis County Republican. "But the plaintiffs bar always wants things wide open. They want it wide open so they can go fishing for business."
Revolving door spins
Even some insurance regulators concede the cozy relationship can lead to lax oversight that hurts consumers.
"You wonder if you get a little bit of the fox guarding the henhouse," said Georgia's elected commissioner, John Oxendine, a politician and attorney who has never worked in the industry.
But insurance companies maintain that hiring former regulators gives them a more consumer-friendly perspective. And commissioners maintain that industry experience gives them understanding of the industry's arcane rules.
Besides, "if you precluded all the people who came from the industry, who would you be left with?" asked former Connecticut Commissioner George Reider, who worked in the industry before becoming a regulator.
However, the way commissioners are appointed -- usually by governors -- worries consumer advocates and some former commissioners. Critics contend you don't have to look further than Missouri.
Insurance Director Dale Finke is a former insurance agent and once led the state Association of Insurance Agents. When the director's seat became vacant last year, Gov. Matt Blunt asked a group of campaign donors and insurance insiders to screen candidates. Finke was their first choice.
Insurers gave Blunt's campaign $135,000 in 2004. Finke and his wife have contributed $6,300 since 2003.
"In most cases, even when a progressive, pro-consumer governor is elected, the insurance commissioner is the insurance industry's appointment," said former Missouri Insurance Director Jay Angoff, who served during Mel Carnahan's administration. "Blunt just asked the industry and made no bones about it: Who do you guys want?"
Blunt's spokesman at the time, Spence Jackson, said governors commonly consult with stakeholders before filling a position, but denied any link to campaign money.
"This is a governor who does not make policy decisions based on campaign contributions," Jackson said.
Finke said his background as an independent insurance broker helps him deal with different insurance companies. "I ve never been considered to be overly friendly to them," he said.
The revolving door spins both ways for politicians.
Former South Carolina Gov. Jim Hodges is now president of the National Alliance of Life Cos. Ex-Oklahoma Gov. Frank Keating heads the American Council of Life Insurers. Other governors also have gone on to serve on corporate boards.
David Schiff, a former insurance executive who now publishes a trade newsletter, said one commissioner told him he went easy on companies that might offer him a job. Schiff suspects many others do the same.
"So many commissioners sit on boards, take jobs with companies they regulated (that) you don't even notice anymore," he said.
Lobbying and influence
Lawmakers sometimes get more money from insurance interests than the average American worker makes in a year.
The money isn't hard to find. In September, Kansas Commissioner Sandy Praeger held a fundraiser in St. Louis during the quarterly conference of the National Association of Insurance Commissioners, where The Star counted industry executives and lobbyists outnumbering commissioners more than 10 to 1.
In her first campaign, Praeger accepted more than $28,000 from Topeka-based American Investors Co., its parent company and subsidiaries, according to Kansas campaign records -- more than she received from any other insurer. Executives and their family members contributed another $8,000 to Praeger.
Since taking office, Praeger hasn't conducted any investigations of the company's performance.
Praeger said her office would investigate American Investors if it had a high number of complaints. Yet The Star found that of the 20 biggest annuity companies doing business in Kansas, American Investors had the worst complaint score.
Mark Heitz, president of AmerUs Annuity Group, has said that the company, which includes American Investors, receives complaints from less than 1 percent of its customers and its goal is to offer "competitive products backed by quality customer service."
Praeger said there is no connection between her actions and campaign donations. She said that she has pushed tougher rules on how annuities are sold, something she wouldn't have done if she were doing favors for an annuity company.
"To me it's not about who's making the donation, but who the donation is going to," Praeger said. "It's about the official's integrity."
Big campaign donors, however, can use money as a weapon, according to California Commissioner John Garamendi. This year, Garamendi asked the FBI to investigate after he said insurers threatened to spend $2.4 million against his campaign for lieutenant governor if he outlawed the use of home ZIP codes in setting auto insurance rates.
"They are one of the most powerful lobbying forces in the country," Garamendi said.
Insurance money seeps through all levels of government. U.S. Sen. Hillary Clinton and outgoing Sen. Rick Santorum each accepted more than $350,000 from insurance interests so far in the 2006 election cycle. Since 2003, California Gov. Arnold Schwarzenegger has accepted more than $2 million from insurance interests.
Blunt awarded contracts to run Department of Motor Vehicle fee offices to four leading contributors in the insurance business. Those offices collectively generate more than $1 million in business for the contract holders.
The FBI conducted an investigation into the awarding of fee office contracts in Missouri, but ended it without seeking any indictments. But mixing money with politics has led to legal troubles elsewhere:
Chicago insurance mogul Mickey Segal and his employees gave more than $400,000 to city, state and federal candidates between 1990 and 2002. Segal counted the mayor's brother and the governor's son as business partners. Some politicians got free or discounted insurance. Segal's firm won millions of dollars worth of city contracts.
Segal was convicted in 2004 of raiding insurance reserves. Prosecutors also said Segal circumvented campaign finance laws by paying employees to make private donations.
In a letter to The Star from prison, Segal said he was prosecuted by the political allies of an insurance rival.
Louisiana Insurance Commissioner Sherman Bernard pleaded guilty to taking bribes. His successor, Doug Green, served 12 years in prison for taking $2 million in illegal contributions from an insurer. And his successor, Jim Brown, served six months in 2002 for lying to FBI agents investigating an insurance settlement.
"You get wined and dined, there are golf outings and there is no limit on what is spent," Brown said. "There are huge industry pressures and a lot of money being thrown around. None of it's illegal, but ..."
Former Oklahoma Insurance Commissioner Carroll Fisher is under house arrest after being found guilty this year of campaign corruption. He pocketed a contribution and accepted gifts from an insurance company. Fisher also blamed politics for his downfall.
"I don't know who I (ticked) off," Fisher said.
Changes coming?
Regulators may be getting the message. More candidates for insurance commissioner are balking at accepting industry contributions.
Washington state prohibits commissioner candidates from accepting insurance money. Washington Commissioner Mike Kreidler said a system of elected regulators prohibited from taking insurance money leads to a greater consumer focus.
"There's accountability," Kreidler said. "There's an expectation that the person who holds this office needs to be a consumer advocate."
New Jersey also has tight restrictions on campaign donations from insurance companies. In other states, elected regulators choose to go without industry contributions. Kansas Gov. Kathleen Sebelius swore off industry money when she was commissioner.
Candidates in this year's California commissioner's race did the same. Lt. Gov. Carlos Bustamante returned some contributions from insurers -- but only after the money became a campaign issue.
"I wanted to show them that I would be their insurance commissioner, not the industry s," he said.
The story so far
In Parts One and Two, The Star showed how the nation's largest insurance companies rated in consumer complaints and how insurance agent misconduct and fraud is widespread and getting worse.
@ Go to KansasCity.com for Parts One and Two and for a searchable database rating hundreds of insurance companies.
Politicians benefit from the relationship, too. Insurance interests gave $1 million to Kansas politicians in the past 10 years, and another $4 million to Missouri politicians.
"When a company tries to constrict a policy, we had to step in."
-- Gary Steuck, the S.D. director of insurance who retired last year
"You wonder if you get a little bit of the fox guarding the henhouse. I know a slew of insurance commissioners that are insurance commissioner because it will look good on their resume..."
-- John Oxendine, Georgia's elected commissioner
"To me it's not who's making the donation, but who the donation is going to. It's about the official's integrity."
-- Kansas Commissioner Sandy Praeger
To contact David Klepper, call (785) 354-1388 or send e-mail to dklepper@kcstar.com.
PART THREE OF THREE
(c) 2006, The Kansas City Star
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