Shirley Jones fumed when her son got a wrenched back in a rear end car collision and the other driver's insurance company balked at paying.

Clifford and Lynne Merritt were outraged when their insurance agent told them he had mistakenly sold them medical coverage that did not exist.

Charles MacAndrew was furious when he was notified his automobile insurance was being terminated for three fender benders and two minor tickets in five years.

In each case, the Northern Virginia consumers fired off angry letters to the powerful State Corporation Commission in Richmond complaining about their treatment at the hands of the insurance companies.

And in each case, the letter writers wound up angrier than ever. Although Virginia's insurance regulators acknowledged the complaints, they made little attempt to investigate any allegations of wrongdoing or penalize the companies involved.

"They pretty much whitewashed the whole thing," says McAndrew, a General Accounting Office employe who lives in Fairfax. "They lived up to the SCC's reputation as a complete sham."

The fact that nothing happened is hardly surprising, says critics familiar with the industry and attempts by Virginia and other states to regulate it.

Although the SCC's Bureau of Insurance received more than 8,000 complaints last year from consumers, it relied on two supervisors and seven staff members to handle much of the work load -- a larger staff than in many states.

And although 650 of those complaints involved allegations of misconduct by insurance agents, the bureau conducted field investigations on fewer than one-third of them. To handle such probes, the bureau has an investigating force of three, all based in Richmond.

"I can handle complaints," says chief investigator G. I. Johnson, a 29-year-old veteran, as he sits in his faded office. "But if we were to go out looking [for violations], you know what I can do with that -- with 35,000 agents in the state."

The Joneses' troubles began last May when a collision on a rainy Viginia highway left their 17-year-old son, Scott, with a back injury and his parents' Pinto in flames.

When they filed a claim for damages, the company insuring the other driver first said it couldn't locate its client. The Joneses made a 150-mile round trip from their home in Springfield to Northumberland County and found him themselves.

The company then argued its client was not to blame. It made no offer of a rental replacement car, a customary courtesy at many companies; refused to pay wages lost while Scott was unable to work, and rejected more than $300 in medical bills.

It also failed to locate and interview an eyewitness to the crash -- an unfair claims settlement practice under Virginia law, which requires companies to investigate accidents fully before refusing to pay.

The Joneses, frustrated, filed complaints with the insurance bureau and the Fairfax County consumer affairs office.

Finally, after weeks of negotiations, the consumer office came through with an $865 settelement. The state, meanwhile, did little, except to advise the Joneses to accept the company's first, $500 settlement, offer. There was no followup on their allegation of misconduct.

Insurance Commissioner Jay Newman defends his agency and its handling of the Joneses' complaint, calling their case "fairly routine." The state's unfair claims act, he notes, requires proof of a pattern of misconduct, not simply a single case.

Besides, he says, "Questions of liability are questions of fact" that are most often resolved in court, not by the insurance bureau. "That's as it should be," says Newman, who acknowledges his staff is overworked.

But the Joneses disagree. They were surprised and angered, they say, when they found there was to be no further probe of the handling of their case. w"It seems like the commissioners just write to the company and the company tells them what they want to hear," said Shirley Jones, Scott's mother.

Clifford Merritt, an independent carpenter in Alexandria, and his wife Lynne, had the same reaction after they complained to Richmond alleging illegal misrepresentation of a medical insurance policy by their insurance agent.

The Merritts paid insurance premiums for nine months and ran up $500 in claims for medical care for their two children before their agent informed them in April that -- by his mistake -- their policy did not include such coverage.

With the help of Fairfax consumer specialist Joy Sandifr, the Merritts worked out a settlement. They reluctantly signed a waiver, canceled the policy and were reimbursed $385 for their monthly premium payments.

"We got a little green postcard (from the insurance bureau) saying our case was being investigated," said Lynne Merritt. "Then we got a telephone call from the state complaint inspector saying he had talked to the company. He advised us to take the settlement and be more careful next time.

"We're satisfied, more or less, with getting our money back. But we think they [the bureau] should have done something about the agent. He could still be out there selling insurance."

Regulation of the wealthy insurance industry, left to the states by a 1944 act of Congress, has grown increasingly controverisal in recent years. A 1979 report by the General Accounting Office said it found "serious shortcomings" in state insurance laws and regulatory activities across the nation. Among the defects cited in the report were understaffing, underfunding and poor training among regulatory personnel.

Accordingly, state regulation has become the center of a political tug-of-war between those favorings the status quo and those who believe a federal takeover is the obvious remedy for weak enforcement.

Virginia isn't good or bad, it's in the middle -- and the middle's terrible," says Robert Hunter, former head of the Federal Insurance Administration who is now an industry consultant in Alexandria.

In the Washington area, Virginia and Maryland are roughly an even match in terms of budget and staffing. Virginia, with its 35,000 agents, has a total staff of 86. Maryland, with an estimated 27,000 to 28,000 agents, has a regulatory force of 120. The District of Columbia lags far behind with a staff of 20 to police approximately 2,300 licensed agents, according to insurance superintendent James R. Montgomery.

One key differnce is Maryland's program, started this year, of agency inspections, the practice of assigning investigators to drop in unannounced at insurance offices around the state to review the books. The program, recommended by the GAO report as good preventive medicine, exists in neither Virginia nor the District.

The same status applies to official hearings for consumers with a complaint. Maryland's insurance division provides hearings in virtually any insurance category, to the point, says one senior insurance official, that "you inevitably wind up wasting some time on nuts."

In contrast, Virginia provides hearings only in automobile insurance cases, and then only when a company has terminated a driver's policy or refused to renew it. Such hearings deal strictly with the procedure of termination, says Newman, and not with the merits of a case.

"We're head and shoulders beyond Virginia in terms of auto policy regulation," says Maryland assistant commissioner Richard Brooks. "It's tougher than hell in Maryland for a company to get off a risk [cancel a policy]. We hold their feet to the fire."

One Virginia resident who might have fared better had he lived in Maryland is Charles McAndrew, a federal employe who lives in Fairfax. Informed by his insurance company that his auto policy would not be renewed, McAndrew fired off erate letters to the insurance bureau in Richmond and the Fairfax consumer affairs office.

Although he had been involved in three accidents in the last five years, McAndrew argued that all were minor fender-benders. Damages from the mishaps added up to $507.90, he said, while he was paying $2,111.02 in premiums in the same period.

McAndrew conceded that he had once been charged with driving on the shoulder of the road, and that his wife, Linda, had been charged with exceeding the speed limit by 10 miles per hour.

But he was angriest, he said, that his company had added the damages from a 1976 scrape and a 1978 collision caused when his car skidded on ice for a total of more than $200 in damages, assigned him a demerit and raised his premiums. Now his insurance was to be terminated.

There is no recourse in Richmond for such a complaint, McAndrew learned. After weeks of correspondence by the Fairfax consumer staff, he was allowed by the company to voluntarily cancel his policy instead of having it terminated, which would make getting new insurance more difficult.

In Maryland McAndrew would have been entitled to an official airing of his problem, but he says, he got nothing from insurance regulators in Richmond.

Industry executives such as John G. Day, former insurance commissioner in Virginia and now head of an industry group in Hartford, believe the state's regulatory efforts are strong enough.

"A big part of effective enforcement is the consumer who complains." Day says. "A knowledgeable consumer is the best help."

But others say they find Virginia a world apart when it comes to getting tough with big business.

"In Maryland, you have strong labor organizations, labor will punch. There's nothing like that in Virginia," says one state legislator who asks not to be named. "In Maryland, there are blacks who can deliver votes. Not so in Virginia. There's no strong consumer voice, nobody like a Nader. n

"The consumer movement in Virginia is woefully inadequate. On a scale of zero to 100, it's probably at the freezing point. It doesn't carry one-fiftieth the weight the business interests do. It's like facing the Pittsburgh Steelers' line."

Still, Virginia's Newman, who is praised by Maryland's Brooks and others as an innovator in less than ideal surroundings, believes he's making progress.

"We have a balanced approach to regulation," he said. "Virginia is a blend of conservatism and general support for business. But there's also a strong element of real concern for the plight of the individual."

As an example, he points to the Adverse Underwriting Decision Act passed in 1978 by the General Assembly, a measure that gives consumers the right in certain instances to know why an insurance company has refused to sell them a policy.

He had worse luck in the legislature's 1980 session with a model bill designed to enhance consumer's rights to see information gathered by insurers and to know how that information is being used.

Sponsored by state Sen. Edward M. Holland, the Arlington Democrat, the bill was opposed by Blue Cross-Blue Shield of Virginia and went nowhere. Newman says he plans to ask for it again.

"My personal philosophy is not to remake the world in a day," says the 38-year-old commissioner. "Every year we try to get a little bit better."

But perhaps reflecting the realities of regulating a $3 billion-a-year industry in a largely pro-business state like Virginia, a consumer guidebook issued by Newman's office notes on the last page: "The people of the Bureau of Insurance cannot work miracles."