Postal Insurance a Bad Deal for Consumers: New ReportAugust 7, 2003
Sub-standard coverage and unconscionably low payout rates currently characterize the U.S. Postal Service’s postal insurance business, according to a new report by the Postal Rate Commission’s Consumer Advocate. The report was released at a policy lunch hosted last month by the Consumer Postal Council.
This latest management scandal comes at the financial detriment of postal consumers, who purchased this coverage nearly 60 million times last year. Among the report’s key findings:
- The Postal Service, which is not subject to state oversight or regulation, pays postal insurance claims at a rate that is so low — 16 percent — as to be termed “unheard of” throughout the rest of the nation’s insurance industry.
- The average consumer claim takes more than twice as long to resolve — 62 days — as the Postal Service itself deemed to be reasonable. The report described how the Service benefits from both a lengthy claims process and denial of claims.
- Consumers are often misinformed about coverage limitations by postal employees who do not themselves understand the lengthy, complicated and vague rules. Postal clerks are under no obligation to provide consumers with any written statement of coverage.
- When claims refusals have been challenged in court, the Postal Service has benefited widely from legal precedents that have upheld its power to interpret and apply its own regulations with a minimum of interference.
Largely as a result of this extremely low payout rate, the largest share of insurance fees goes to cover the cost of the sales clerks themselves. Further, the Postal Service has both the freedom to place any limitations on insurance coverage and the power to decide whether insurance claimants have presented adequate evidence to justify paying claims. This, the report suggests, provides a financial incentive for the Postal Service to deny as many claims as possible.
Postal Rate Commission Consumer Advocate Shelley Dreifuss also proposed a number of reforms that could make postal insurance a much fairer deal for consumers. These included requiring the Postal Service to make full disclosure of terms and limitations at the time of purchase, requiring it to establish payout ratios similar to those set by state regulatory agencies, and holding down insurance fees using an assigned interest figure for indemnity costs.
The Consumer Postal Council is a policy organization established to advance the interests of consumers concerned about postal issues, and other organizations that share their concerns.