California Insurance Commissioner Steve Poizner has given GEICO a show cause order on steering and underpayment issues.
The commissioner first settled with the insurer in May 2007 over allegations of underpayments. GEICO paid a $60,000 penalty and was put on notice not to repeat its practices. During the next year, members of the Collision Repair Association of California (CRA) sent Poizner complaints about GEICO’s continued practice of failing to pay the reasonable cost of repairs and blatant steering behavior.
“We were heard,” said Allen Wood, CRA executive director. “All those small claims court awards against GEICO in favor of CRA customers were substantial evidence that this insurer doesn’t like to follow the rules.”
According to Teresa Campbell, the department attorney who signed the order against GEICO on Dec. 16, 2008, the department and the insurer are discussing what will happen next. The possibilities range from a hearing where GEICO would attempt to explain why it shouldn’t be punished to fines, either large or small.
“It’s significant that the order contains allegations that GEICO engaged in steering claimants away from shops they selected,” Wood said. “This order was issued shortly before the commissioner released proposed rules on steering. If nothing else, this order throws into question the statements of insurance lobbyists who contend that steering doesn’t exist.”
In the May 2007 order, GEICO was criticized for not submitting a labor rate survey to the department. When the insurer did file a survey in November 2007, it contained rates for motorcycle shops and other businesses that brought the average labor rate down to DRP levels in certain market areas, said Wood, adding that equipment, training and types of vehicles being repaired are important factors in setting labor rates.
“The CRA has worked hard to drive home the message that some insurers steer and consistently underpay claims,” said CRA President Lee Amaradio. “Much credit should go to Gene Crozat, the past president, who worked tirelessly against unfair insurer practices and for the benefit of claimants.”
