June 22, 2024

Bloomberg.com – Home Insurers’ Secret Tactics Cheat Fire Victims, Hike Profits

In a report written in August 2011, bloomberg.com tells of many cases where insurance companies are hiring consultants to lower the amount paid on claims made by homeowner.  The report cites examples where Allstate and State Farm hired Mckinsey & Co. to produce large presentations to teach employees how to reduce the amounts paid.

An excerpt follows from Bloomberg

`Boxing Gloves’

McKinsey produced about 13,000 pages of documents, including PowerPoint slides, in the 1990s, for Northbrook, Illinois-based Allstate. The consulting firm developed methods for the company to become more profitable by paying out less in claims, according to videotaped evidence presented in Fayette Circuit Court in Lexington, Kentucky, in a civil case involving a 1997 car accident.

One slide McKinsey prepared for Allstate was entitled “Good Hands or Boxing Gloves,” the tape of the Kentucky court hearing shows. For 57 years, Allstate has advertised its employees as the “Good Hands People,” telling customers they will be well cared for in times of need.

The McKinsey slides had a new twist on that slogan.

When a policyholder files a claim, first make a low offer, McKinsey advised Allstate. If a client accepts the low amount, Allstate should treat the person with good hands, McKinsey said. If the customer protests or hires a lawyer, Allstate should fight back.

“If you don’t take the pittance they offer, they’re going to put on the boxing gloves and they’re going to batter injured victims,” plaintiffs attorney J. Dale Golden told Judge Thomas Clark at the May 12, 2005, hearing in which the lawyer introduced the McKinsey slides.

The Alligator

One McKinsey slide displayed at the Kentucky hearing featured an alligator with the caption  “Sit and Wait.” The slide says Allstate can discourage claimants by delaying settlements and stalling court proceedings.

By postponing payments, insurance companies can hold money longer and make more on their investments — and often wear down clients to the point of dropping a challenge. “An alligator sits and waits,” Golden told the judge, as they looked at the slide describing a reptile.

McKinsey’s advice helped spark a turnaround in Allstate’s finances. The company’s profit rose 140 percent to $4.99 billion in 2006, up from $2.08 billion in 1996. Allstate lifted its income partly by paying less to its policyholders.

The report paints a less than rosy picture of the insurance industry tactics towards policyholders with legitimate claims. Let’s face it, no company goes into business to lose money, but what are the limits that a company WILL go to to pad their pockets to the detriment of it’s customers?  And how long before this kind of activity is going to be examined more closely and seriously?

An interesting piece in the article about Hurricane Katrina damage and insurance industry engineering their results to match what they wanted. Amazingly, there were only 1000 lawsuits filed in a hurricane that killed more than 1600 people and left half a million people homeless. One really questions how many claims were underpaid to people desperate to get their lives moving again and took whatever the insurance company offered. Also interesting is that there apparently much effort went into pushing the reports to indicate water damage was the culprit – even in the face of authoritative reports indicating wind damage. Note that flood damage is handled by the US government and does NOT come out of the insurer’s pocket, thus by attributing the damage to all water damage, the insurer alleviates themselves of any responsibility and thus any payouts.

For insurers, the multibillion-dollar question regarding Katrina was how much of the destruction was caused by wind and how much by water. Property insurance policies don’t cover damage caused by flooding; homeowners have to purchase separate insurance administered by the U.S. government.

Altering Reports

The wind/water issue has spurred allegations that insurers manipulated the findings of adjusters and engineers.

Ken Overstreet, an engineer based in Diamondhead, Mississippi, who examined destroyed Gulf Coast residences, says someone altered his findings on the cause of the damage to at least four homes.

“We were working for insurance companies, and they wanted certain results,” says Overstreet, who has been a licensed civil engineer since 1981. “They wanted to get a desired outcome, and that’s what they did.”

In this section a bit further down Bloomberg’s article, we see that the insurance industry is definitely being proactive. If we know Washington, it would appear that it probably won’t be examined seriously any time real soon…

Insurance Lobbying

To make their voice heard on federal regulation and other government decisions, insurers spent $98 million on lobbying in Washington in 2006, according to PoliticalMoneyLine, a unit of Congressional Quarterly. That’s the second-largest amount spent on lobbying by any group, behind $114.4 million by pharmaceutical companies.

This article is a must read for anyone interested in what to expect when filing a property damage claim or any other claim against their insurer – and why it is almost a must in all but the simplest cases to hire a professional Public Adjuster to help in property damage claims.

If the insurance company is hiring experts to find ways to reduce property damage claims, delay payouts or outright deny claims, why would anyone go through the process alone?  We, at American Property Loss, are experts no your side.  We are used to the games and stalling tactics the insurance company uses.  We know how to ask for what is owed to you, based on your policy and damages, using their systems.

Call today for a free property damage claim evaluation.  Remember, Your Recovery is Our Success!

(855) 757 APLS

Read the entire article here: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aIOpZROwhvNI

Speak Your Mind


Site by Lizardwebs.net