North and South Dakota Fine Insurers More than $1 Million

In separate investigations, state insurance regulators in North and South Dakota have found operational issues with three different insurance carriers and issued fines of more than $1 million in total.

The South Dakota Division of Insurance (DOI) said it reached a settlement with Farmers Insurance Group and Foremost Insurance Group over what it said were “various deficiencies in the companies’ practices that needed to be corrected.”

The two groups were assessed a monetary penalty totaling $750,000.

“We have concerns any time an insurance law is violated in our state,” South Dakota Insurance Director Larry Deiter said in a departmental announcement. “The number of violations in this particular report was a significant reason for the monetary penalty.”

Five insurance companies within the Farmers and Foremost groups were examined.

The Farmers Insurance Group companies that were part of the examination are Farmers Insurance Exchange, Fire Insurance Exchange and Mid Century Insurance Company.

The Foremost Insurance Group companies are Foremost Insurance Company and Foremost Property and Casualty Insurance Company.

While specific violations and corrective action are listed in the examination report, the department said that under state statute the report itself must remain confidential for 30 days. It will be available will for public inspection on the DOI website on July 6, 2015,

“We provide a clear set of rules for all companies to play by and have a duty to hold companies accountable,” Deiter said.

The Associated Press reported that Farmers spokesman Luis Sahagun said the company does not agree “with many of the South Dakota Insurance Division’s findings of alleged violations” and has agreed to the settlement “in order to resolve the matter.”

North Dakota, American National

In North Dakota, Insurance Commissioner Adam Hamm said his department is assessing a $275,000 penalty against Galveston, Texas-based American National Insurance Co. (ANICO).

An order and the administrative penalty were issued after the state insurance department completed an investigation into ANICO’s claims settlement practices. The investigation was initiated by an insured’s complaint to the department about ANICO’s practices regarding the payment of guaranteed issue in credit life insurance or credit disability insurance.

According to the DOI, the investigation revealed that American National failed to follow the law regarding guaranteed issue coverage.

Guaranteed issue in credit life insurance or credit disability insurance is the minimum benefit amount an insurer must issue regardless of the policyholder’s health status. Currently, the guaranteed issue amount required by North Dakota law is $5,000 for both credit life insurance and credit disability insurance.

The department found that ANICO had failed to make required guaranteed issue payments to the complainant from February 2004 to April 2013.

The company also did not pay required the guaranteed issue amount to 43 other insureds in North Dakota, the investigators discovered. Six of the 43 purchased both credit life insurance and credit disability insurance and were denied proper guaranteed issue on both, the order stated.

In all, the department cited ANICO for 49 separate unfair claim settlement practices.

“This investigation found American National Insurance Company systematically failed to follow the law over the course of many years,” Hamm said in an announcement. “This type of unacceptable behavior is rarely seen in our state and demanded a large penalty.”

The department required American National Insurance Company to reimburse all affected consumers

A copy of the North Dakota order can be found on the DOI website.

American National did not immediately return a call from the AP seeking comment.