August 1, 2011

How State Laws Protect Citizens From Disreputable Car Insurance Companies

Car insurance scams are rare, but they can be disastrous for drivers. Disreputable car insurance companies might charge unreasonably high rates after a traffic incident, or even worse, they might refuse to honor valid insurance claims, leaving drivers with serious bills after an accident. Fortunately, state car insurance law provides a measure of protection from drivers and stops disreputable car insurance companies from taking advantage of their customers. Every driver should understand how state car insurance law works, as dealing with disreputable car insurance companies can be costly and state laws often provide a welcome resource for avoiding these costs.

State law is particularly important in controlling how rates are set. States prevent disreputable car insurance companies from charging customers unfairly and from providing discounts that could be seen as discriminatory or coercive. Drivers can't be charged more on the basis of factors such as ethnicity or handicap status. Discounts need to fall under state guidelines, which vary greatly. For instance, in some states, it's illegal for insurance companies to offer loyalty discounts, because they could conceivably prevent a customer from shopping around for a better policy. However, most state regulations that pertain to car insurance discounts focus more on discriminatory pricing. State laws can also prevent insurance companies from denying coverage unfairly or from charging exorbitant fees when a driver has been involved in an accident.

The claims process is also protected by various state laws. Most states have guidelines in place to prevent untimely payouts. Car insurance companies are compelled to resolve claims as quickly as possible, and when a successful claim has been made, payout must occur within a set time period, usually between two weeks and one month. If a payout takes longer, policy holders can complain to state insurance commissioners. Insurance commissioners have the power to levy fines on car insurance companies, and if a certain insurer has a number of outstanding complaints, that insurer may even be barred from doing business in the state. Insurance commissioners provide an important service for consumers by enforcing state car insurance law and preventing car insurance scams from taking hold.

Overall, state car insurance law is protective and helpful, but unfortunately, overregulation can lead to higher insurance rates on average. As such, lawmakers try to strike the right balance when protecting drivers, weeding out car insurance scams while avoiding unnecessary or impractical regulations that could make it difficult for insurance companies to do business. Drivers should learn their rights when a car insurance company seems to be acting unfairly, as state car insurance laws can be used to avoid the most serious consequences of working with a disreputable car insurance provider.