According to reports, auto insurance companies in Idaho that offer additional services go beyond the insurance contract at no added costs to existing policy makers and prospective clients may be in trouble of violating certain provisions in the state law.
The Idaho Department of Insurance recently sent out a warning to insurance providers that offering of free extra services is prohibited under state law. Recent reports indicate that the warning was issued due to instances in recent months that a number of insurance companies have been guilty of offering value added services as a way of reducing the costs of the auto insurance plan. According to a major insurance consultancy firm in Idaho, cases when extra services such as administration of a buy down program for a former policyholder were offered to potential clients.
As per Idaho Code Section 41-1314, any person is prohibited from directly or indirectly offering or giving as an inducement to purchase insurance that is not plainly specified in the insurance contract. State legislators say that anything to induce the sale of auto insurance can be anything that has value whatsoever. Legislators explain that the section illustrates that for a violation to occur, the extra service must be offered or given to a client as a way to induce or lure them to buy car insurance.
On the other hand, the Idaho Department of Insurance gave guidelines to insurance companies to help them avoid incurring violations against the state law. To abide by the state provisions, insurance providers should bill clients a reasonable amount in the event that they plan to offer goods or services not mentioned in the contract that may induce the purchase of insurance policies. The reasonable amount should show in detail the actual value of the good or service being offered. However, the services that can be classified as part of customer service which normally comes free will not be considered by the Deparment as an inducement to purchase insurance.
According to industry insidered, the warnings released by the state’s Department of Insurance can be difficult to implement as companies today can come up with their owns to induce potential clients and at the same time not violate the state law provisions. Experts say that as long as there are no clear guidelness that differentiate customer service from extra service as form of inducement, companies can easily get away with offering free added value services without getting caught. On the other hand, legislators are now debating on how to make Idaho Code Section 41-1314 more strict for tricky insurance providers.