Tuesday, June 22, 2010

Beware Cheap, Minimum Driver's Insurance

There is a whole industry out there geared towards selling cheap, minimum coverage insurance to drivers. Many states require drivers to carry insurance. Some smart people have figured out there is big money in providing the absolute minimum amount of coverage required by law, for what seems to be a cheap price, to people who for some reason can't qualify or can't afford 'regular' insurance.

This posting is not meant for those who might consider purchasing such coverage. This posting is a warning for all the other folks driving out there, who might end up having to deal with these companies because of an accident.

I have some direct knowledge of this subject, but hesitated posting anything just because of my personal feelings. Yeah ... I know ... that usually doesn't stop me.

A recent article in the Dallas Morning News provided the catalyst for this post. It lays out, in black and white figures, exactly what these companies are doing, and how well they are performing. The Texas Department of Insurance has been investigating two companies, Fred Loya Insurance and Old American County Mutual, whose whole business is these cheap policies, for violations of state regulations. Both companies have complaint indexes FAR in excess of any other insurer in Texas. The companies have a business relationship, so it is almost the same company.

The target customer base for these companies is people from south of our border, whether they are here legally or illegally. Their advertising in areas heavily populated by NCSA people is in Spanish. They are not, and do not pretend, to be competitors for companies such as Allstate. The point is to sell these folks a policy that makes them legal to drive (even if they aren't in the country legally) - a policy that covers the absolute minimum.

Your problems will begin as soon as you are involved in an accident with one of their customers. They will duck your calls, delay answering, deny claims, send out fractional payment checks hoping you will settle for that, tell you you have to use substandard shops and/or used parts to repair your vehicle - and if your claim involved anything medical, watch out! These people are masters at finding ways not to pay claims.

I have personal knowledge of this. My daughter was hit by a kid whose parents carried a Fred Loya policy. No injuries, thank goodness, but significant damage. It took me months to get the issue settled in a satisfactory manner, and it was only after I involved my insurance company and threatened legal action. Their representatives were rude, evasive, or unavailable every time I called. They will try to intimidate you, to quote non-existant regulations that make you have to settle for a fraction of the damages, to refuse to pay for damages, to refuse to talk to you or your insurance company, to drag things out so long that they hope you will give up. In short, they will expend all the energy they have in order to minimize the amount of money they pay out.

You can't threaten them with reporting them to the State Insurance Board - the board is a toothless government entity that just generates reports. Also, Loya is the worst of the worst - that is a known, published fact, and they (and their customers) don't care.

My advice - if you are involved in an accident with a Loya client:

1) Make sure you get a police report detailing the accident. Do not just exchange insurance info - call the police and get the written report. In a lot of cases you will find that the contact information their client gives is bogus, and you'll never be able to find them. Without the report, Loya may try to disavow everything.

2) You might want to involve your insurance company at the start, even if the accident is not your fault. This way you are covered in case Loya will not pay, and your insurance company has a lot more clout in dealing with Loya than you do.

3) If there is an injury involved on your side, lawyer up IMMEDIATELY.

My best advice - pray that you never get hit by a Fred Loya insured driver.

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