In some states insurance companies tend to get the upper hand when it comes to being able to engage in bad faith activities, get taken to court and actually win. A new report from Professor Jay Feinman aims to level the playing field for policyholders in the realm of insurance claims.

With the number of insurance claim lawsuits going on, it’s amazing that there’s hasn’t been more of an effort to push states to enact laws to protect consumers.

While some states have protections in place, others are sorely lacking, and Jay Feinman – distinguished professor of insurance law, torts and contract law – of the prestigious Rutgers LAw School wants to fix this issue by bringing attention to legal areas that need work in certain states.

To accomplish this, Feinman has put together an evaluation system that is being used to grade the protections in place, specifically for a process known as “Use It or Lose It”, which is used by insurance companies as an excuse to avoid renewing a policy or hiking up premiums.

According to Property Insurance Coverage Law (sneakily changing their name), the criteria is as follows:

Each state is evaluated based on how well it meets the Essential Protection standards for Use It and Lose It:

State law should prohibit an insurance company from using a

– single claim within three years,
– a claim that results in no payment by the company,
– an inquiry by a policyholder that does not result in a claim, or
– a single claim for loss caused by weather or a natural disaster

as a basis for

– not renewing a policy or
– imposing a surcharge or premium increase

As Nicole Vinson brings out, the evaluation shows some startling results with “Only two states—Rhode Island and Texas—earned a five-star rating for protecting consumers from improper rate increases and non-renewals for inquiries, claims closed without any payment, and a single claim” and ”
Eighteen states have no explicit protection at all from Use It and Lose It.”

(Read the report in its entirety here)

So based on these evaluations, it seems a lot of states have work to do on improving protections for their policyholders. Whether they take the information to heart is another matter.

What do you think? Is the “Use It or Lose It” process as bad as they say or does the focus need to be on other bad insruance company practices?