Today the American Assoication for Justice (AAJ – formerly the Association of Trial Lawyers of America) released a list of the worst insurers for consumers. The list is a result of a study done by AAJ. At the top of that list was Allstate. The list encompasses insurance other than auto.
Here is what the AAJ had to say:
“While Allstate publicly touts its ‘good hands’ approach, it has instead privately instructed its agents to employ a ‘boxing gloves’ strategy against its policyholders,” said American Association for Justice CEO Jon Haber. “Allstate ducks, bobs and weaves to avoid paying claims to increase its profits.”
Allstate (NYSE: ALL) set the standard for insurance company greed and placing profits over policyholders. Allstate contracted with consulting giant McKinsey & Co. in the mid-1990s to systematically force consumers to accept lowball claims or face its “boxing gloves,” an aggressive strategy designed to deny claims at any cost. One Allstate employee reported that supervisors told agents to lie and blame fires on arson, and in turn, were rewarded with portable fridges.
Thousands of court documents, materials uncovered from litigation and discovery, testimony, complaints filed with state insurance departments, SEC and FBI records, and news accounts were reviewed to compile the rankings and statistics.
The rest of the rankings are as follows:
2. Unum (NYSE: UNM) – Unum’s actions are even more shameful considering the type of insurance it sells: disability. Unum’s behavior was epitomized when it denied the claim of a woman with multiple sclerosis for three years, stating her conditions were “self-reported,” contrary to doctors’ evaluations. In 2005, Unum agreed to a settlement with insurance commissioners from 48 states over their practices.
3. AIG (NYSE: AIG) – The world’s biggest insurer, AIG’s slogan was “we know money.” AIG, described by commentators as “the new Enron,” has engaged in massive corporate fraud and claims abuses. In 2006, the company paid $1.6 billion to settle a host of charges.
4. State Farm – State Farm is notorious for its deny and delay tactics, and like Allstate, hired McKinsey consultants. State Farm’s true motives became apparent during Hurricane Katrina; for example, it employed multiple engineering firms until they could deny the claims of the Nguyen family of Mississippi. In April 2007, State Farm agreed to re-evaluate more than 3,000 Hurricane Katrina claims.
5. Conseco (NYSE: CNO) – Conseco sells long-term care policies, typically to the elderly. Amongst its egregious behavior, the insurer “made it so hard to make a claim that people either died or gave up,” said a former Conseco-subsidiary agent. Former Conseco executives were fined when they admitted to filing misleading financial statements with regulators.
The bottom 5 were:
WellPoint (NYSE: WLP)
Farmers
UnitedHealth (NYSE: UNH)
Torchmark (NYSE: TMK)
Liberty Mutual
The end of the press release gave some figures:
Financial documents also revealed extravagant profits and executive compensation while policyholders’ claims were routinely delayed and denied:
- Over the last 10 years, the property / casualty and life / health insurance industries have each enjoyed annual profits exceeding $30 billion.
- The insurance industry takes in over $1 trillion in premiums every year. It has $3.8 trillion in assets, more than the GDPs of all but two countries.
- The CEOs of the top 10 property / casualty firms earned an average of $8.9 million in 2007. The CEOs of the top 10 life / health insurance earned an average of $9.1 million.
- The median insurance CEO’s cash compensation is $1.6 million per year, leading all industries.
In the event Allstate or any of the insurance companies listed has a response, I’ll post it. As usual, comments contrary to the study/results and its fairness are welcome.