Ten Worst Insurance Companies Revealed

If you have a claim with one of these insurance companies the American Association for Justice gives the opinion that these ten insurance companies are the most difficult to deal with. I have reprinted excerpts from the report they published.

Of course if your claim is with another insurance company you still may have a difficult time getting a fair offer.

The Ten Worst Insurance Companies in America

How They Raise Premiums, Deny Claims, and Refuse Insurance to Those Who Need it Most


To identify the worst insurance companies for consumers,
researchers at the American Association for Justice (AAJ)
undertook a comprehensive investigation of thousands of
court documents, SEC and FBI records, state insurance
department investigations and complaints, news accounts
from across the country, and the testimony and depositions
of former insurance agents and adjusters. Our final
list includes companies across a range of different insurance
fields, including homeowners and auto insurers,
health insurers, life insurers, and disability insurers.


Allstate—The Worst Insurance Company



One company stood out above all others. Allstate’s concerted
efforts to put profits over policyholders has earned
its place as the worst insurance company in America.
According to CEO Thomas Wilson, Allstate’s mission is
clear: “our obligation is to earn a return for our shareholders.”
Unfortunately, that dedication to shareholders
has come at the expense of policyholders.


The company that publicly touts its “good hands” approach privately
instructs agents to employ a “boxing gloves” strategy
against its own policyholders.1 In the words of former
Allstate adjuster Jo Ann Katzman, “We were told to lie by
our supervisors—it’s tough to look at people and know
you’re lying.”

The Insurance Industry’s Wealth

• The insurance industry has so much excess cash it may
spark a downturn in the industry. According to analysts
at Standards & Poor’s, U.S. insurers are sitting on
too much capital, and will likely endure at least three
years of negative performance as a result.


The Ten Worst Insurance companies

1. Allstate
2. Unum
3. AIG
4. State Farm
5. Conseco
6. WellPoint
7. Farmers
8. UnitedHealth
9. Torchmark
10. Liberty Mutual

• The U.S. insurance industry takes in over $1 trillion in
premiums annually.3 It has $3.8 trillion in assets, more
than the GDPs of all but two countries in the world
(United States and Japan).

• Over the last 10 years, the property/casualty insurance
industry has enjoyed average profits of over $30 billion
a year. The life and health side of the insurance industry
has averaged another $30 billion.

• The CEOs of the top 10 property/casualty firms earned
an average $8.9 million in 2007. The CEOs of the top
10 life and health insurance companies earned even
more—an average $9.1 million. And for the entire
industry, the median insurance CEO’s cash compensation
still leads all industries at $1.6 million per year.

Profits Over Policyholders

But some companies have discovered that they can make
more money by simply paying out less. As a senior executive
at the National Association of Insurance
Commissioners (NAIC), the group representing those
who are supposed to oversee the industry, said, “The bottom
line is that insurance companies make money when
they don’t pay claims.”

One example is Ethel Adams, a 60-year-old woman left
in a coma and seriously injured after a multi-vehicle crash
in Washington State. Her insurance company, Farmers,
decided the other driver had acted intentionally and
denied her claim, contending that an intentional act is
not an accident. Another example is Debra Potter, who
for years sold Unum’s disability policies until she herself
became disabled and had to stop working. All along,
Potter thought she was helping people protect their
future, but when her own time of need came, she was
told her multiple sclerosis was “self reported” and her
claim denied—by Unum, the very company whose policies she has sold.

In cases like these, and countless others, the name of
the game is deny, delay, defend—do anything, in fact, to
avoid paying claims. For companies like Allstate, there are
corporate training manuals explaining how to avoid payments,
portable fridges awarded to adjusters who deny the
most claims, and pizza for parties to shred documents.

ALLSTATE


CEO: Thomas Wilson
2007 compensation $10.7 million
(predecessor Edward Liddy made
$18.8 million in compensation and an
additional $25.4 million in retirement
benefits)
HQ: Northbrook, IL
Profits: $4.6 billion (2007)
Assets: $156.4 billion

There is no greater poster child for insurance industry
greed than Allstate. According to CEO Thomas Wilson,
Allstate’s mission is clear: “our obligation is to earn a
return for our shareholders.”9 Unfortunately, that dedication
to shareholders has come at a price. According to
investigations and documents Allstate was forced to
make public, the company systematically placed profits
over its own policyholders. The company that publicly
touts its “good hands” approach privately instructs
agents to employ a hardball “boxing gloves” strategy against its own policyholders.


Allstate’s confrontational attitude towards its own policyholders
was the brain child of consulting giant McKinsey
& Co. in the mid-1990s.McKinsey was tasked with developing
a way to boost Allstate’s bottom line.11 McKinsey
recommended Allstate focus on reducing the amount of
money it paid in claims, whether or not they were valid.
When it adopted these recommendations, Allstate made a
deliberate decision to start putting profits over policyholders.
The company essentially uses a combination of lowball
offers and hardball litigation.When policyholders file a
claim, they are often offered an unjustifiably low payment
for their injuries, generated by Allstate using secretive
claim-evaluation software called Colossus. Those that
accept the lowballed settlements are treated with “good
hands” but may be left with less money than they need to
cover medical bills and lost wages. Those that do not settle
frequently get the “boxing gloves”: an aggressive litigation
strategy that aims to deny the claim at any cost.

Former Allstate employees call it the “three Ds”: deny,
delay, and defend. One particular powerpoint slide
McKinsey prepared for Allstate featured an alligator and
the caption “sit and wait”—emphasizing that delaying
claims will increase the likelihood that the claimant gives
up. According to former Allstate agent Shannon Kmatz,
this would make claims “so expensive and so time consuming
that lawyers would start refusing to help clients."


Former Allstate adjusters say they were rewarded for
keeping claims payments low, even if they had to deceive
their customers. Adjusters who tried to deny fire claims by
blaming arson were rewarded with portable fridges,
according to former Allstate adjuster Jo Ann Katzman.

“We were told to lie by our supervisors. It’s tough to look
at people and know you’re lying.”14
Complaints filed against Allstate are greater than
almost all of its major competitors, according to data collected
by the NAIC.15 In Maryland, regulators imposed the
largest fine in state history on Allstate for raising premiums
and changing policies without notifying policyholders.
Allstate ultimately paid $18.6 million to Maryland
consumers for the violations.16 In Texas earlier this year,
Allstate agreed to pay more than $70 million after insurance
regulators found the company had been overcharging
homeowners throughout the state.

After Hurricane Katrina, the Louisiana Department of
Insurance received more complaints against Allstate—
1,200—than any other insurance company, and nearly
twice as many as the approximately 700 it received about
State Farm—despite the fact that its rival had a bigger
share of the homeowners market.

Similarly, in 2003, a series of wildfires devastated
Southern California, destroying over 2,000 homes near
San Diego alone and killing 15 people. State insurance
regulators received over 600 complaints about Allstate and
other companies’ handling of claims.19
Allstate says the changes in claims resolution tactics
were only about efficiency.20 However, the company’s former
CEO, Jerry Choate, admitted in 1997 that the company
had reduced payments and increased profit, and said,
“the leverage is really on the claims side. If you don’t win
there, I don’t care what you do on the front end. You’re not going to win."


For four years, Allstate refused to give up copies of the
McKinsey documents, even when ordered to do so repeatedly
by courts and state regulators. In court filings, the
company described its refusal as “respectful civil disobedience.”
22 In Florida, regulators finally lost their patience
after Allstate executives arrived at a hearing without documents
they had been subpoenaed to bring. Only after
Allstate was suspended from writing new business did the
company, in April 2008, finally agree to produce some
150,000 documents relating to its claim review practices.23
Still, some commentators believe many critical documents
were missing.

Allstate’s “boxing gloves” strategy boosted its bottom
line. The amount Allstate paid out in claims dropped
from 79 percent of its premium income in 1996 to just 58
percent ten years later.25 In auto claims, the payouts
dropped from 63 percent to just 47 percent.26 Allstate saw
$4.6 billion in profits in 2007, more than double the level
of profits it experienced in the 1990s.


In fact the company is so awash in cash that it began buying back $15 billion
worth of its own stock, despite the fact that the company
was simultaneously threatening to reduce coverage of
homeowners because of risk of weather-related losses.27
Despite its treatment of policyholders, Allstate’s recent
corporate strategy has focused on identifying and retaining
loyal customers, those who are more likely to stay with
the company and not shop around.


The target demographic as former Allstate CEO Edward Liddy said, is
“lifetime value customers who buy more products and
stay with us for a longer period of time. That’s Nirvana
for an insurance company.”

Loyalty only runs one way, however.While Allstate
focuses on customers who will stick with it for the long
haul, the company is systematically withdrawing from
entire markets. Allstate or its affiliates have stopped writing
home insurance in Delaware, Connecticut, and
California, as well as along the coasts of many states,
including Maryland and Virginia.

In Louisiana, Allstate has repeatedly tried to dump its
policyholders. In 2007, the company tried to drop 5,000
customers just days after the expiration of an emergency
rule preventing insurance companies from canceling customers
hit by Katrina. Allstate dropped them for allegedly
not showing intent to repair their properties. After an
investigation by the Louisiana Insurance Department,
Insurance Commissioner Jim Donelon said, “[A]t best, it
was a very ill-conceived and sloppy inspection program.
At worst, they wanted off of those properties.”30 Allstate
also used an apparent loophole in the law by offering its
policyholders a “coverage enhancement” which the company
would later argue was a new policy, and thus exempt
from non-renewal protection.

In Florida, Allstate has dropped over 400,000 homeowners
since 2004.32 The move has landed Allstate in trouble
with regulators because the company appears to be
keeping customers if they also have an auto insurance
policy with Allstate. Florida law prohibits the sale of one
type of insurance to a customer based on their purchase
of another line of coverage.33 Allstate officials have
acknowledged that most of the 95,000 customers nonrenewed
in 2005 and 2006 were homeowners-only customers.
The company ran afoul of regulators in New York
for the same reason, and was forced to discontinue the
practice.

In California, while other major homeowner insurers,
including State Farm and Farmers, agreed to cut rates,
Allstate demanded double-digit rate increases in what the
former insurance commissioner described as an “exit
strategy.” John Garamendi, now the Lieutenant Governor,
said, “[T]hey’ve said they want to get out of the homeowners
business in a market that is competitive, healthy
and profitable.”

Consumer advocates have also complained that Allstate
put an ambiguous provision in homeowners’ policies that
may have deceived some policyholders into thinking they
had coverage for wind damage when they did not. Socalled
“anti-concurrent-causation” clauses state that wind and rain damage—
damage covered under the policy—
is excluded if significant flood damage occurs as well.

Therefore, those with policies covering wind and rain damage
and “hurricane deductibles” still faced the prospect of
learning, only after a catastrophic loss, that they had no
coverage.36 In 2007, then U.S. Senator Trent Lott sponsored
legislation requiring insurers provide “plain English” summaries
of what was and what was not covered in order to
stop this kind of abuse. “They don’t want you to know
what you really have covered,” said Lott.

The complete article can be provided on request and is reprinted from the american association for justice