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 CRA members sent the commissioner complaints about GEICO’s continued practice of failing to pay the reasonable cost of repairs and blatant steering behavior.
“We were heard,” stated 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.”
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, noted Wood.
“Regardless of the quality of the survey, it is vital to note that a survey is not proof that a labor rate is unreasonable,” said Wood. “Equipment, training and type of vehicles repaired are important factors in setting a fair labor rate.”
According to Teresa Campbell, the department attorney who signed the order against GEICO on December 16, 2008, the department and the insurer are discussing options. The possibilities range from a hearing where GEICO would attempt to explain why it shouldn’t be punished to fines, either large or small.
Wood added, “It is significant that the order contains allegations that GEICO engaged in steering claimants away from shops they selected. 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. “
“The CRA has worked hard to drive home the message that some insurers steer and consistently underpay claims,” stated 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. ”
The order is attached .