AZ Circular Letter 1985-02: Intentional Misquoting of Personal Lines Property and Casualty Rates

STATE OF ARIZONA

DEPARTMENT OF INSURANCE

JANE DEE HULL

2910 NORTH 44th STREET, SUITE 210

CHARLES R. COHEN

Governor

PHOENIX, ARIZONA 85018-7256

Director of Insurance

602/912-8456 (phone) 602/912-8452 (fax)

Former Director S. David Childers issued the following Circular Letter on June 24, 1985:

INTENTIONAL MISQUOTING OF PERSONAL LINES

PROPERTY AND CASUALTY RATES

June 24, 1985

The Arizona Department of Insurance holds as one of it highest priorities the

investigation of consumer complaints relating to unfair dealing practices between

insurers, their agents and the insurance-buying public. As a direct result of a number of

such complaints, the Department has recently conducted a limited study into the

practice of some insurers of providing a prospective insurer with a premium quotation at

the time of application much lower than the premium reflected in the billing that the

insured received at policy issuance.

That study covered 21 cases reported to the Department of Insurance and was

restricted to quotes for automobile coverage. In those 21 cases the original premium

quotations totalled $10,327, but the ultimate billing to the insureds by the insurer or

agency totalled $15,520 – an increase of over 50%. The additional premium billed over

that quoted averaged $247 per insured. In each case the error was alleged to have

been inadvertent.

Upward revisions in rate quotations such as those described could result from

errors on the part of the company or agent, errors on the part of the applicant, or false

information intentionally supplied by the applicant or the insurer or its agent. It is the

position of the Department that where such actions are intentional on the part of the

insurer or its agent, a misrepresentation violative of A.R.S. § 20-443 has occurred

ations such as those described could result from

errors on the part of the company or agent, errors on the part of the applicant, or false

information intentionally supplied by the applicant or the insurer or its agent. It is the

position of the Department that where such actions are intentional on the part of the

insurer or its agent, a misrepresentation violative of A.R.S. § 20-443 has occurred.

Therefore, the Rates and Regulation Division and the Consumer Affairs Division

have been advised to closely monitor and investigate allegations of intentional upward

premium quotation adjustments and to vigorously pursue appropriate administrative

action against those individuals committing such practices.

S. David Childers

DIRECTOR OF INSURANCE