Universal Underwriters Insurance ordered to refund fees

Universal Underwriters Insurance Co., the nation's largest insurer of automobile dealerships, has been ordered by regulators to refund to customers overcharges discovered in a routine review of the company.  
 
The Kansas Insurance Department found a "large number of rating errors" in a market conduct examination of the Overland Park insurer. Department officials said the total amount of the overcharges would not be known until Universal Underwriters completes an internal review.  
 
Charlene Bailey, a spokeswoman for the department, said the refunds would range from $ 1,000 to $ 10,000 per commercial account and cover Kansas policies issued since Jan. 1, 2002.  
 
"Until the actual refunds are given out by the company, we won't know how much the totals are," she said.  
 
Universal Underwriters wrote about $ 1.5 billion in premiums nationwide in 2004 and about $ 11.5 million in Kansas. The overcharges uncovered by the insurance department relate only to policies issued in Kansas.  
 
Universal Underwriters' owner, Schaumburg, Ill.,-based Zurich North America Commercial, acknowledged Thursday that the market conduct exam had "revealed inaccuracies in the rating of some of the company's commercial package (Unicover) policies."  
 
In a written statement, Zurich said that Universal Underwriters planned to issue refunds to current and former policyholders in Kansas who paid premiums in excess of Universal Underwriters' filed rates.  
 
"Universal Underwriters also is proactively contacting the insurance departments in other affected states to identify and resolve any issues," the statement said. "Until an independent, third-party review of all Unicover policies is complete, which is expected to be by the end of the first quarter 2006, the exact number of policyholders affected and amount to be refunded cannot be determined."  
 
The policies of Universal's Unicover, which is licensed in all states, cover auto dealerships, automotive parts stores, detail shops and other automotive businesses.  
 
In July, Stephen R. Smith, the president and chief executive of Universal Underwriters, resigned. The company said that Smith had planned to retire and that his resignation was not related to the overcharging problem.  
 
Three months earlier, Universal Underwriters announced that it would be sold for $ 1.1 billion to an investor group led by the private equity firm of Hellman & Friedman. The sale is pending. Zurich said that all parties were "actively working" on closing the transaction.  
 
The overcharges were discovered during a routine market conduct examination performed by the insurance department. Market conduct exams are performed at random intervals or triggered by complaints and must be conducted at least once every five years. The exams are designed to review how insurance companies treat customers and to ensure that companies are following Kansas insurance laws and regulations.  
 
The report on Universal Underwriters' examination stated that the company passed most tests, "and in terms of delivering good service to its insureds, the examiners were impressed with the overall positive and very professional performance by the (Universal Underwriters) staff and management to their policyholders."  
 
But in a random sampling of 50 commercial policies, the examiners found eight errors, or rates charged by Universal Underwriters that the company had not filed with the insurance department. The examiners recommended that the department require Universal Underwriters to present a plan within 30 days for refunding the overcharges.  
 
Lyle Behrens, the insurance department examiner in charge of the market conduct exam, said that Universal Underwriters had since presented "a plan with a