Nationwide to pay $50,000 settlement over insurance rate hikes

Allied Property and Casualty and six affiliated insurance companies have agreed to pay a $50,000 penalty to the State of Iowa because of coding errors that caused them to overcharge on 1,721 Iowa auto insurance policies with an "accident forgiveness" feature.

The problems came to light in 2009 when the Iowa Insurance Division began investigating a complaint from a policyholder about  an increase in rates at policy renewal time.  The insurer was asked to respond.

When Allied and other companies in the Nationwide group investigated the complaint, they found the customer was right. They said the problem was an error in manually coding a "chargeable accident" which should have been  under the threshold to trigger a rate increase.

The problem was not isolated to the customer who made the complaint. After investigating, Nationwide found  1,721 policies in Iowa had been affected by the same type of error.

The Iowa Insurance Division cited Nationwide  under the Iowa Unfair Trade Practices Act, which defines unfair methods of competition and unfair or deceptive acts, and the Iowa Casualty Insurance Act, which restricts excessive rates or unfair discrimination in rates.

Early this year, refunds totaling $382,757 were made to the 1,721 policyholders.

The companies have since improved their training procedures for employees in an effort to curb the mistakes, according to a settlement agreement approved by the insurance division last month. The division ordered Allied and the other Nationwide companies  to submit reports in August of 2011 and 2012 certifying that the changes to its policy processing systems are functioning correctly. The Nationwide companies also were ordered to work with an independent outside examiner that will examine the effectiveness of its system.

The order affects Allied Property and Casualty Insurance Co.,  AMCO Insurance Co., Depositors Insurance Co., Nationwide Insurance Co. of America, Nationwide Affinity Insurance Co. of America, Nationwide Agribusiness Insurance Co. and Nationwide Mutual Insurance Co. All are part of the Nationwide group of companies.