American General Assurance Company has been fined $125,000 by the Minnesota Department of Commerce after performing poorly on a market conduct examination.

According to Commerce Commissioner Jim Bernstein, the company failed to pay at least 85 claims in a timely manner and did not pay interest on money it owed to policyholders on 17 of those claims. American General also incorrectly calculated unearned-premium refunds.

Part of the examination included a review of the claims-handling process. American General allegedly failed to properly maintain its claim files as required by Minnesota law, and went so far as to fail to provide claim forms to policyholders who notified the company of a loss.

American General sells credit insurance, credit card insurance, and mortgage insurance to customers of institutions, such as banks and car dealerships, all of which do business in Minnesota. Insurance policies include life, disability, and involuntary unemployment coverage.

Bernstein says that in addition to the monetary fine the company must provide written evidence within six months that it has implemented policies and procedures to correct the problems uncovered in the examination.

Calls to American General for comment were not immediately returned. In 2001, American General collected approximately $7 million in premiums from Minnesota consumers and paid $2.9 million in benefits. In total, Minnesotans paid $98.6 million for credit insurance in 2001 and received $33.5 million in benefits, for a "loss ratio" of 34 percent. Other life and disability insurance products in Minnesota average a minimum 55 percent loss ratio.