Ore. Insurers Wrongly Penalizing Drivers for Coverage Lapses

Some Oregon car insurers have been penalizing consumers for lapses in their coverage history even if they were for legitimate reasons, spurring regulators there to issue an advisory this week reminding policyholders that the practice is prohibited.

The most common legitimate reasons that a driver has a hole in their history of coverage, according to Ron Fredrickson, a consumer advocate with the Oregon Insurance Division (OID), aren’t surprising:

  • They were deployed or overseas and didn’t need to drive.
  • They use alternative transportation instead of driving.
  • They sold their car and stopped driving.
  • They went to college or school and didn’t need the car.

But however legitimate those reasons are, consumer advocates have encountered instances in which insurers insist on charging a customer higher premiums, according to Fredrickson.

Fredrickson said he did not “have hard numbers” on how many times the OID has fielded inquiries on the topic but said that they involved “a variety of insurers,” including at least one major insurer, that he declined to name.

“The way insurers see it, someone who was driving without insurance is less responsible than someone who has maintained their insurance,” he told Online Auto Insurance News (OAIN). “But some people stop insurance when they stop driving altogether, and since that can be for legitimate reasons, we want to make sure people don’t get punished for that.”

Fredrickson said the “most egregious examples” he’s encountered are when military servicemen and women return from overseas to find out they’ll have to pay more when re-entering a policy with their car insurer.

“That’s just not right,” he said.

‘A Lot of People Will Just Buy That’

The nine consumer advocates at the OID started seeing enough complaints from consumers that they wanted to issue public advisories through state radio and print outlets, according to Fredrickson, who said that the problem likely extends past the policyholders that come to him with questions.

“We think that a lot of people will just buy that, just accept that, so we don’t think we even hear from everybody that this happens to,” he said. “With those [legitimate] scenarios, we don’t believe they create a greater level of risk. Companies are apparently doing this without investigating what actually took place.”

While insurers can’t deny or charge more for coverage because of a legitimate lapse in coverage, they can legally ask an applicant the reason for that lapse.

“Many companies provide a checklist so consumers can identify the valid reason that they dropped coverage,” according to the advisory.

Of course, an insurer can legally pump up prices because an applicant drove without coverage, so any tickets for uninsured driving is “pretty good evidence” that an insurer will use to inflate premiums.

There are other—more obvious—signs of uninsured driving, Fredrickson said.

“Somebody told a story in a meeting about someone without insurance driving a car to their agents’ office to buy a new policy, so that is pretty clear-cut evidence,” he said. “I believe that’s a sign of risk, to do something like that.”

Oregonians with complaints and questions about insurance should call the OID at 888-877-4894 between the weekday hours of 8 a.m. and 5 p.m.

Fredrickson also operates a Q&A blog that contains responses to other car coverage-related questions from consumers.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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