Justified Complaint (Home Insurance)

What is 'Justified Complaint (Home Insurance)'

A formal complaint made against a home insurance company that is found in violation of the insurance contract it entered into with the policyholder. A justified complaint ensues when an insured has a valid concern in the way the insurer conducts and manages its businesses and upholds its contract agreements.

On the other hand, a complaint is found to be unjustified if there is no apparent violation of an insurer’s contractual obligations.

BREAKING DOWN 'Justified Complaint (Home Insurance)'

There are a number of dealings that could go wrong for an insured from the moment s/he secures a homeowner's insurance policy to the moment when s/he cancels the contract with the insurance company. It is recommended that complaints are made to the necessary authorities when an insurer falsely represents its position as a coverage provider. Not every policyholder knows when an insurance company has violated its contractual position as the insurance company’s representatives may convincingly give appropriate and seemingly normal recommendations and solutions to inquiries. Some violations of home insurance companies could be subtle and undetected, while other violations could be apparent to the policyholder and any regulatory body hearing the case. A prudent policyholder who realizes a wrong has been done to him/her may choose to file a complaint to his/her state’s insurance department.

A complaint filed with a state insurance department will be found to be justified if the insurance company conducted its business in a way that violated standard insurance practices. The following are examples of justified complaints:

  1. Misrepresentation, omission, and concealment of facts
    • A complaint that involves an insurance company that misrepresented the home insurance coverage purchased by the policyholder. A home owner that was informed, when purchasing property coverage, that his/her coverage would include property damage due to “flooding” would have a justified complaint if his home gets flooded from a rainstorm and the insurance company denies coverage and claims that it meant flooding from in-home systems like a burst pipe.
    • A homeowner that files a claim for fire damage in the home is compensated for the costs to rebuild or repair the damages by his insurance provider. However, the insurer fails to mention that the policyholder is entitled to be compensated for his temporary living accommodation.
    • A policyholder who attempts to cancel his policy is informed by the insurer that he will have to pay additional costs to cancel the contract when no such stipulation is mentioned in the contract agreement.
  2. Violation of fair claims practices
    • A policyholder who files a claim on property damage is given an inflated cost of repair assessment by a claims adjuster which may increase the out-of-pocket costs or deductible amount for the claimant.
    • An insurance company reimburses the claimant for less than the full value of the claim due to insufficient assessment and evaluation of losses and damages to the property
    • An insurance company takes 90 days to make the settlement payments when the insurance contract clearly states 60 days
    • An insurance company denies a claim for a rare artwork theft in a property whereas the legal contract states reimbursement for collectibles.
  3. Poor customer service
    • A claims adjuster was sent to the claimant’s home to assess property damages weeks after the insurance company was first alerted of the catastrophe.
    • Unreturned repeated phone calls and emails made to the insurance company by a policyholder.

This list of examples is by no means an exhaustive list of what qualifies as justified complaints. Policyholders should read the fine print of their contracts to know what is covered and how much premium or deductible he is responsible for.

State insurance departments and the National Association of Insurance Commissioners (NAIC) annually publish results of justified complaints to the public. The result ranks home insurance companies according to their justified complaints ratio which is based on the number of justified complaints per 100,000 policies. The 2015 Homeowners Complaint Composite Report released by the California Department of Insurance showed the ranking on the 50 largest insurance companies according to justified complaints made against them. The company in the last position, Federal Insurance Company, had a complaint ratio of 23. This means that from January 1st to December 31st 2015, the company had 23 justified complaints against them for every 100,000 policies. The lower the ratio, the better the home insurance coverage provided by the insurer is perceived to be.

Home insurance shoppers may be better served if they take advantage of the justified complaint report published by the NAIC and state insurance departments. The report shows an insurer’s complaint histories and the types of complaints received. This information coupled with the complaints ratio should aid a home insurance shopper in deciding which company to get coverage under.

Home owners who would like to make a complaint against their insurer can fill out the state form available in the Consumer Information Source (CIS) database of the NAIC website.