AAA Subsidiaries in Hot Water Over $2.6 Million Refunds and Fines
Have you ever wondered what happens when insurance companies don’t follow the rules? Well, that’s exactly what unfolded in North Carolina recently. Two insurance subsidiaries owned by the Auto Club Group (AAA)—Members Insurance Co. and Universal Insurance Co.—are making headlines for all the wrong reasons. These companies were hit with hefty fines and ordered to pay millions in refunds to policyholders after an investigation revealed numerous violations.
But before we get to the fallout, did you know AAA didn’t always own these companies? Here’s the scoop: The Auto Club Group acquired the Carolina Motor Club Group (which included Members and Universal) on January 1, 2020. This move made AAA the sole controlling entity of these insurers.
What went wrong?
The North Carolina Department of Insurance (DOI) conducted a market conduct examination and unearthed a laundry list of issues. From improper notifications about consent-to-rate charges to billing errors and even delays in paying claims, these companies didn’t exactly have a spotless track record. They were also found to have used unlicensed adjusters, which is a big no-no in the industry.
How did policyholders get affected? The investigation revealed that some policyholders were overcharged on their premiums. One question many might ask is, “How much is being refunded?” And here’s your answer: Members Insurance Co. and Universal Insurance Co. will pay out more than $2.6 million to affected policyholders. Plus, there’s the $113,000 in fines tacked on for good measure.
Why the hefty fines? The fines were imposed partly because the violations spanned a considerable timeframe—from July 1, 2019, to June 30, 2022. During that period, errors like delays in policyholder claims and incomplete notifications added up. And if you’re wondering where that $113,000 fine is going, it’s actually good news for North Carolina schools. Under the state’s constitution, fines collected from such penalties benefit public education.
Was any action taken during the investigation? Yep. While the examination was ongoing, around $475 in refunds were already issued to correct some premium overcharges discovered in sample reviews. It’s a drop in the bucket compared to the total, but still a step in the right direction.
Now, if you’re thinking, “How are they fixing this?” here’s the deal. Members and Universal didn’t just agree to pay refunds and fines; they also submitted a corrective action plan to the DOI. The companies committed to addressing all the violations and ensuring compliance moving forward.
Insurance Commissioner Mike Causey weighed in on the resolution, saying, “I’m glad to see that policyholders are being refunded over $2 million. This resolution avoids a drawn-out administrative hearing and benefits everyone involved.”
How did this all come to light? The market conduct examination, which started in May 2023, concluded nearly a year later in May 2024. It shone a light on deeply rooted issues within the companies’ operations, including delayed responses to complaints and the use of unlicensed adjusters.
But wait, what about AAA’s role in this? While the company acquired Members and Universal in 2020, the violations spanned both before and after the acquisition. It seems AAA now has some cleanup to do as the parent company.
What’s next for these companies? The corrective action plan is expected to overhaul processes, from billing to claims handling, ensuring no such violations happen again. Plus, the DOI isn’t letting this go lightly. They’ll likely keep an eye on these companies to ensure future compliance.
Still got questions? Here’s a quickfire summary to clear things up.
Why were the companies fined? For violations like improper billing, delays in claims, and using unlicensed adjusters.
How much will policyholders get refunded? Over $2.6 million.
When did AAA acquire these companies? Members and Universal became part of AAA’s family on January 1, 2020.
Where does the $113,000 fine go? Straight to North Carolina public schools.
How long did the investigation take? Nearly a year, from May 2023 to May 2024.