Patty’s Takes: Restitution bill the correct step to protecting Washington consumers

Patty’s Takes are a series of posts on issues of importance to Washington state’s Insurance Commissioner, Patty Kuderer.

My office has received more than 120 complaints about Quick Health (aka Seguro Medico), which passes itself off as a health insurance company. It has a history of selling fake insurance plans, drafting fees out of unsuspecting victims’ bank accounts, and demanding thousands of dollars for new policies after customers wise up to the fact that their initial policies are useless.

One customer paid Quick Health nearly $20,000 based on lies from an agent, only to find his insurance didn’t work with cancer screenings already scheduled.

Another paid more than $47,000 over 14 months and didn’t realize her ‘coverage’ was useless until after her husband’s heart attack. She told our office she’s stopped going to the doctor and her husband is going without his medication.

My office has fined Quick Health $100,000 and suspended their agents’ licenses. We’ve warned people to make sure they’re buying insurance from a legitimate company.

What we can’t do is order Quick Health to pay back the estimated $777,000 it owes its victims in Washington state.

We can’t order companies to make things right — but a piece of current legislation could change that.

Senate Bill 5331 grants the Insurance Commissioner the authority to order restitution be paid to the victims of insurance entities’ illegal actions. Put simply, it permits my office to give people what they want most when financial fraud occurs — their money back.

The current mechanism for victims to gain reimbursement is to hire an attorney and take their case to court. It adds time and stress to the recovery process. In some cases, the time, effort and up-front financial investment involved might not even be worth the payout. Who could blame those victims for giving up on the whole process?

We’ve also heard pushback from the industry at large. There’s been claims that restitution is already something our office negotiates through consent orders, which makes this bill unnecessary.

The consent orders we negotiate, though, are exactly that: Orders in which the insurance entity consents to the agreed-upon fine and, in some cases, restitution for the people they’ve harmed. Our authority is more limited when enforcing the law upon disreputable companies who refuse to work with our agency.

This restitution bill, though, isn’t just about restitution. There’s currently a $10,000 limit on the fines our office can impose on property and casualty insurers who violate the law. We’ve negotiated larger fines with reputable companies who recognize the impacts of their violations; they’re often the ones who report the issues to us in the first place. This bill changes that limit — a limit that, again, usually doesn’t factor into discussions with reputable insurance companies — to $10,000 per violation.

Washington is an outlier in how it fines property and casualty insurers. Forty other states already issue fines to regulated entities on a per-violation basis. In Washington, property and casualty insurers are again an outlier as they are subject to only a $10,000 fine, no matter how egregious the violation may be.

Companies can already object to fines through an administrative law judge; insurers also have several layers of judicial review beyond that to protect against excessive fines. Our publicly available records show that significant fines are rare and reserved for violations that impact large numbers of consumers and involve particularly bad conduct.

This adds to the tools our office uses to go after the companies that disregard the law. We’ve heard from plenty of insurance agents that support the bill and the increased authority it grants our office. They realize the change only impacts bad actors who would defraud their own customers.

My office has been tasked with regulating the insurance industry and protecting consumers. Those are two sides of the same coin; strong regulation protects consumers, and regulated industries are less likely to harm people.

Too many times we’ve fielded complaints from people who are left wanting by insurance entities and drop their complaints, defeated, when they realize the length of time it will take to receive restitution.

Like our investigation into Quick Health showed, there are fraudulent actors in the insurance industry willing to take advantage of the vulnerable. The restitution bill will help us make those victims whole again.