Justified Complaint (Home Insurance)

A justified complaint is a formal grievance made against an insurance company for a violation of contract terms. A justified complaint happens when a policyholder has a valid concern regarding how the insurer conducts and manages its businesses and upholds its contract agreements. On the other hand, a complaint, or grievance, is unjustified if there is no apparent violation of an insurer’s contractual obligations.

There are numerous possibilities for insurer wrongdoing. Policyholders should file complaints with state governing 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 some company representatives may convincingly give appropriate and seemingly reasonable recommendations and solutions to inquiries. Some violations by insurance companies could be subtle and undetected, while other offenses could be overt. A policyholder who uncovers wrongdoing may choose to file a complaint with their state’s insurance department.

A complaint filed with a state insurance department is justified if the insurance company performed in a way that violated standard insurance practices. The following are examples of justified complaints:

1. Misrepresentation, concealment of facts, and omission:
   • Misrepresentation suggests that an insurance company misrepresented the home insurance coverage offered to or purchased by the policyholder. 
   • Concealment of facts occurs when an insurer withholds or conceals material facts from the insured or potential insured. 
   • Omission occurs when material information is excluded or omitted.  
2. Violation of fair claims practices: 
   • Example: A policyholder files a claim and is given an inflated cost of repair assessment by a claims adjuster that may increase the claimant's out-of-pocket costs or deductible amount.
   • Example: 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.
3. Poor customer service examples:
   • Example: A claims adjuster arrives at the claimant’s home to assess property damages weeks after the initial notification of the catastrophic event.
   • Example: The insurance company does not return phone calls or emails.

The examples provided are not exhaustive. Policyholders should thoroughly read their contracts to understand the coverages, limits, exclusions, and general provisions.

State insurance departments and the National Association of Insurance Commissioners (NAIC) publish results of justified complaints to the public each year. The results rank home insurance companies according to their justified complaints ratio. The ratio is a calculation of the number of legitimate complaints per 100,000 policies underwritten. As suggested by the formula, low ratios are favorable.

Each state will publish a Homeowners Complaint Composite Report, which can be found using an internet search. These composite reports will vary in the layout by state. Some will show the type of complaint, type of related insurance product, and the names of companies involved in the claim. The reports are valuable to the individual hoping to compare companies before purchasing a product.

Home insurance shoppers may benefit from 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 pursue.

Homeowners 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.