Because They Can

I have insurance covering my musical instruments through Clarion Associates in New York. I’ve had it for a number of years. If you’re a pro, you need coverage through a specialty company like Clarion. The big companies (State Farm and so on) will cover amateurs’ instruments, but not professionals’. Too risky. Clarion’s policies cover you wherever you are, whatever you’re doing. Or so I’ve been informed. I’ve never filed a claim, so I have no idea how eager or reluctant they are to compensate policyholders for losses.

This week I got my new bill from Clarion, and the premium had gone up by 25%. Naturally, I was curious to know why. A rate hike of that magnitude is not just inflationary, it’s extortionate.

So I phoned Clarion. I got a runaround. I got bullshit. The woman I talked to steadfastly refused to admit that it was bullshit, but it was. In the end, I told her I’d had enough bullshit for one day, and hung up on her.

Here’s what I understand, was told, or surmise.

First, you need to understand that Clarion is just an office in New York. They are not an insurance carrier. They take your application and your money, but the actual coverage is provided by an underwriter. When I first took out my policy, more than a decade ago, the carrier was Lloyd’s of London. The carrier today is a company called Starnet.

You can’t talk to Starnet. They don’t have a website, and they don’t have a phone number. They are, however, part of the Berkley Risk Administrators Company, which does have a website and lists the phone numbers of regional offices. I haven’t bothered to call them. I’m darn sure I’d get the runaround from a regional office, and I don’t need the aggravation.

The story, according to the supervisor I spoke to at Clarion, is that the State of California, which quite appropriately regulates the insurance industry, did an audit of Starnet. I don’t know when the audit was begun, when it was concluded, what the state”s legal authority is to mandate rate changes (but see below), what its findings were, or what rate changes (if any) it told Starnet to make.

All I know is that Clarion is pointing the finger at the State of California as the source of the rate hike, even though the Clarion people themselves have had no dealings whatever with the State of California. Clarion says the state told Starnet to make changes. When I asked Clarion why the state told Starnet to raise my rate by 25%, there was no answer. That’s when I got the runaround, the old soft shoe, the stream of bafflegab.

The Clarion representative told me (I’m paraphrasing and may have the wording wrong) that California didn’t say, “Raise the individual policy rates by 25%.” Instead, they looked at the way Starnet was providing discounts, and decided that some of those discounts were not appropriate, or were not warranted, or something. Now, I never had any discounts on my policy in the first place, as far as I’m aware. The Clarion story seems to be that because the state ruled out discounts that I wasn’t getting, my rate went up. They tell me California’s effort was to increase the fairness to consumers. So, in order to be fair to me, they raised my rate by 25%.

Does this make any sense to you?

Clarion says they sent out an email explaining the situation to their policyholders back in November, and asked policyholders to fill out a new application. I don’t remember receiving the email, but possibly my junk filter grabbed it. I was busy at the time, what with Mom being really, really sick, so I may not have scanned the contents of the junk folder before emptying it. Clarion did not, however, follow up with a letter to my mailing address. And by the way, the junk filter didn’t filter out emails from Clarion this morning, so that explanation is a little thin.

Why did they need a new application from existing policyholders? That’s a good question. I don’t know. What I was told was that since I didn’t fill out a new application, I got tossed into what I would call the high-risk, no-discount group. If I had any discounts before, the discounts were simply crossed off. Ignored. This would seem to be, at the very least, unprofessional conduct on the part of Clarion. If, on the other hand, I didn’t have any discounts to start with, then we’re left with the fact that Starnet raised my rate by 25% on the basis of something or other that they were told to do by the State of California. Or that they claim they were told by the State of California.

It’s beginning to seem that Starnet may be playing a shell game here. Given the number of insurance pies in which W. R. Berkley has his fingers, he seems to be a real wheeler-dealer. Not all wheeler-dealers are guilty of financial chicanery, and I know nothing whatever about W. R. Berkley to suggest that he manipulated the outcome of the audit (if there was an audit) to his own advantage, or that anyone in his company did so, or that they made any mendacious statements whatever to Clarion. All I’m saying is, it’s not beyond belief that someone in his position would do something of the sort.  Starnet may have used the audit, or a fish story about an audit, as an excuse to boost their rates, secure in the knowledge that the yobbos at Clarion wouldn’t be sharp enough to ask the right questions. This is pure speculation on my part — I have no evidence that would lead me to such a conclusion.

Being of a curious turn of mind, I called the California State Department of Insurance. They answered the phone promptly, and I learned two fascinating things.

First, since I purchased my policy through Clarion, and Clarion is based in New York, my policy would be regulated by the State of New York, not the State of California. That’s the case even though I’m a California resident.

Second, the State Department of Insurance in California does not regulate rates. Let’s run that one again: California’s insurance department does not regulate the rates charged to those who take out insurance policies.

These two facts leave us with a rather narrow range of possible conclusions. (a) The person at Clarion may have been lying to me. (b) The person I spoke to at Clarion may have been lied to by her boss. (c) The people at Starnet may have lied to the people at Clarion. Can you think of any other explanations that fit the facts? I sure can’t.

I sent a link to this post to the folks at Clarion, to give them a chance to explain the situation. I mean, if you’re going to publish a complaint, you need to operate in an ethical manner. While I was out to lunch, I got a phone message from the president and owner of Clarion. He offered to re-evaluate my rate if I file a new application (which is what one of his employees had offered previously), but he offered no explanation of Clarion’s policies, other than to say that I would have to have 20 years in the insurance industry to understand the situation.

That, in itself, is a good reason not to take out a policy with them. If consumers can’t understand what they’re being asked to purchase … in that case, as they say in New York, fuhgeddaboudit.

As a footnote: The person I spoke to at the insurance department didn’t have immediate access to any records that would relate to an audit of Starnet by their department. Thus even the existence of such an audit remains unproven, and its relevant findings, if any, and regulatory changes pursuant thereto, if any, are unknown.

Second footnote: A quick web search found two other companies (Heritage and Music Pro) that offer cheaper coverage. You have to wonder: Is Clarion trying to drive their customers away? Or do they think we’re too dumb to do any shopping around?