Connecticut Fines Safeco $434K over Numerous Violations

July 24, 2009

The Connecticut Insurance Department has fined Safeco Cos. $434,000 following a market conduct exam of the five subsidiaries for the insurer.

The fines are for violations that include improper cancellations, improper rating and using unlicensed agents and adjusters among others. The five subsidiaries covered by the fines are Indiana-based American Economy Insurance Co. ($41,000) and American States Insurance Co. ($68,000); Washington-based General Insurance Co. of America ($76,000) and Safeco Insurance Co. of America ($144,500); and Safeco Insurance Co. of Illinois ($104,500)

"While the Connecticut Insurance Department acknowledges Safeco's commitment to corrective action, we are disturbed by the number and breadth of violations our exam team uncovered," said Insurance Commissioner Thomas Sullivan. "Our examination of this firm calls into question the extent to which they have proper compliance monitoring and controls. On behalf of consumers of this state, we will be actively scrutinizing this company going forward to ensure they are committed to conducting business within the boundaries of our insurance laws."

While the violations varied by company, there were consistent violations related to instances of unlicensed adjusters and the use of non-appointed agents. Connecticut requires insurers to formally appoint and register with the state all agents who sell insurance products on their behalf.

The fined companies had 55 instances where agents were not appointed and 93 instances where individuals acted as a casualty adjuster without being licensed in accordance with Connecticut law.

Other violations included instances where companies did not include in their settlement, the amount attributed to one's inability to use their property, which is commonly referred to as 'loss of use'. Violations of 'loss of use' occurred, on nearly one out of four settlement claims.

Additionally, numerous underwriting and rating errors resulting in under- and over-charging premiums and incorrect coverage amounts were found across all companies which contributed to the significant fine.

The errors were primarily related to commercial products.

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Source: Connecticut Insurance Department