Thursday, February 20, 2020

No. 356: GEICO's "Patriot Penalty" Imposed on Automobile Insurance Premiums Paid by Soldiers Returning from Deployment

On February 11, 2020, the Consumer Federation of America (CFA) issued a press release entitled "Consumer Advocates Call for End to GEICO's 'Patriot Penalty' Revealed by Investigative Report." Here is the opening paragraph of the CFA press release:
Berkshire Hathaway subsidiary GEICO adds a surcharge to the auto insurance premiums of soldiers who dropped their coverage while they served abroad, according to a televised report by investigative reporter Lee Zurik. Consumer Federation of America (CFA), which has verified this "patriot penalty" through its own research, called on the nation's insurance commissioners to intervene, in a letter it sent today.
The letter to the state insurance commissioners is over the signatures of Douglas Heller and Robert Hunter of CFA. The letter is in the complimentary package offered at the end of this post, along with the CFA press release.

The Size and the States
According to the investigative news report, the surcharge on returning soldiers can be as large as $500 every six months, even where the service member has a clean driving record. According to the CFA press release, some states, including California and Florida, explicitly prohibit insurers from imposing such surcharges on safe drivers.

However, according to a preliminary review of GEICO's practices, such surcharges have been found in at least 21 states: Arizona, Arkansas, Delaware, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Minnesota, Nebraska, Nevada, New Jersey, New York, North Carolina, Tennessee, Washington, and West Virginia. In its letter, CFA says legislation should be sought immediately if the commissioner does not have authority to prevent such surcharges.

My Efforts to Contact GEICO and a Few Commissioners
I attempted to contact GEICO by telephone for comment, but I was not able to reach a human being. I then tried to contact by email a few of the 21 states mentioned in the CFA press release. One of the states replied immediately, but the others have not yet replied.

Indiana, where I live, sent Bulletin 126 dated June 7, 2004. It is entitled "Applications for Personal Lines Coverage by Returning Members of the Armed Services." It cites Indiana Code Sections 27-1-22-26, which say a violation is "an unfair and deceptive act or practice in the business of insurance." The 15-year-old Indiana bulletin is in the complimentary package offered at the end of this post.

General Observations
I was surprised by the CFA press release about the GEICO surcharge imposed on military personnel returning from deployment outside the country. Such surcharges are outrageous. It is unconscionable to impose surcharges on members of the military, who risk their lives to protect our nation. I agree with CFA that insurance regulators should take action to prohibit such surcharges, and should seek state legislation if the regulators do not already have such authority.

The Indiana bulletin and statute raise at least two questions. First, how many states (in addition to California and Florida, which are mentioned in the CFA material), have such rules and regulations? Second, how many states with such rules and regulations enforce them vigorously?

I hope and fully expect that Warren Buffett, the famous chairman of Berkshire Hathaway, will agree with the sentiments expressed by the CFA and in this post. I am attempting to get this post into his hands.

Available Material
I am offering a complimentary 5-page PDF consisting of the CFA press release (2 pages), the CFA letter to the commissioners (2 pages), and the Indiana bulletin (1 page). Email and ask for the February 2020 package about GEICO's patriot penalty.