National General Faces DOJ Lawsuit for Unfair Car Insurance Practices – Are You Affected?

National General, an insurance company owned by Allstate, is currently facing a lawsuit filed by the U.S. Department of Justice (DOJ).

The lawsuit alleges that National General charged additional insurance fees to thousands of customers who already had adequate coverage, particularly targeting Wells Fargo customers with auto loans.

From 2008 to 2016, National General reportedly imposed unnecessary insurance on borrowers, often leading them to pay costs they did not owe, suffer loan defaults, car repossessions, and credit score damage.

Here’s a breakdown of the case, its impact, and what it could mean for affected customers.

Allegations Against National General

1. Forced Insurance Placements
   The DOJ alleges that National General wrongly forced “collateral protection insurance” (CPI) on customers who already had proper insurance. This CPI was meant to cover collision and comprehensive damages but came with higher costs and limited coverage compared to standard policies.
2. Wells Fargo’s Involvement
   The case claims that Wells Fargo worked with National General to verify insurance coverage on financed vehicles. When proof of existing insurance was not located, National General would automatically apply CPI, adding it to the borrower’s loan balance. This practice unfairly increased loan costs for unsuspecting customers.
3. Financial Impact on Borrowers
   For each forced CPI policy, borrowers were charged an average of $1,100 per year. This additional fee led many to face financial difficulties, including loan defaults, vehicle repossessions, and credit damage. National General is reported to have profited over $500 million from these CPI premiums.

National General’s Response

National General denies these claims, stating the accusations are false and promising to present their side in court. They face potential fines under the Financial Institutions Reform, Recovery, and Enforcement Act, with penalties to be determined.

What This Means for Car Insurance Customers

The DOJ’s investigation highlights broader concerns about transparency in the car insurance market.

With 49% of Americans already feeling they pay too much for car insurance, cases like these add to public frustration and raise questions about fair practices in the industry.

This lawsuit is a critical reminder of the importance of transparency in auto insurance practices. With rising costs and added fees, many customers struggle to afford car insurance, especially if unexpected charges like CPI are added to their accounts without full disclosure.

This case also puts a spotlight on industry-wide practices that may need reform to ensure fair treatment for all consumers.

If successful, the DOJ’s case could lead to stricter regulations on how insurance companies and lenders manage collateral protection insurance, potentially benefiting countless borrowers across the country.