The Ten Worst Insurance Companies In America

Recently, the American Association for Justice (of which I am a proud member) completed an investigation of the insurance industry in America.

What follows is a ten part synopsis of their investigation. You can read the full article at the American Association for Justice Website www.justice.org. For today, I will start with an Introduction and Part I: Allstate.

Introduction:

Allstate – The Worst Insurance Company in America

Not surprisingly to me (as I’ve been fighting these companies in court for 22 years), Allstate stood out as the Worst Insurance Company in America. I know from personal experience that over my career, I have sued Allstate more than all other companies combined. Allstate has consistently put profits over policyholders. CEO Thomas Wilson once said “our obligation is to earn a return for our shareholders”. This has come at the expense of policyholders. Those “good hands” usually are wearing boxing gloves when it comes to claims.[1] Former Allstate adjuster Jo Ann Katzman stated “We were told to lie by our supervisors – it’s tough to look at people and know you’re lying.”

Before looking at Allstate in detail, let’s look at America’s insurance industry in general:

The Insurance Industry’s Wealth and Power

U.S. insurance companies take in over $1 trillion in premiums annually, and they have $3.8 trillion in assets, which is more than the GDPs of all countries in the world except Japan and the U.S.[2]

Over the last 10 years, both the property/casualty and the life/health insurance industry have average profits of $30 billion annually.[3] The CEOs of the top property/casualty firms earned an average of $8.9 million and the life/health firms $9.1 million. The $1.6 million average industry wide for CEOs leads all industries per year.[4]

Profit over Policyholders

A senior executive at the National Association of Insurance Commissioners (the group that is supposed to be overseeing these companies) said, “The bottom line is that insurance companies make money when they don’t pay claims.”[5]

The name of the game is deny, delay and defend. Do anything to avoid paying claims. For companies like Allstate, there are corporate training manuals explaining how to avoid payments; appliances awarded to adjusters who deny the most claims; and pizza delivered to shredding document parties.

Here is the top ten list:

1. ALLSTATE

2. UNUM

3. AIG (YES THE ONE WE JUST BAILED OUT!)

4. STATE FARM

5. CONSECO

6. WELLPOINT

7. FARMERS

8. UNITED HEALTH

9. TORCHMARK

10. LIBERTY MUTUAL

Let’s look briefly at each one:

Part I

ALLSTATE

CEO: Thomas Wilson – 2007 compensation $10.7 million (predecessor Edward Liddy made $18.8 million and $25.4 million in retirement benefits).

Profits: $4.6 billion (2007)

Assets: $156.4 billion[6]

The poster child for insurance industry greed started putting profit over policy holders in the 1990s by focusing on reducing the amount of money it paid out on claims. They combined lowball offers with hardball litigation tactics. They use secretive claim evaluation software called “Colossus” that generates low offers. They use the “sit and wait” technique knowing that most claimants will eventually give up.[7] Former Allstate agent Shannon Kmatz said this would make claims “so expensive and so time-consuming that lawyers would start refusing to help clients.”[8]

Former Allstate adjusters said they were rewarded for keeping claims payments low, even if they had to deceive customers. Adjusters who tried to deny fire claims by claiming arson were awarded appliances.

Complaints against Allstate are greater than most of its major competitors. Maryland imposed the largest fine in state history against Allstate, and in Texas in 2008 they agreed to pay more than $70 million after insurance regulators found they had been overcharging homeowners throughout the state.[9]

After Hurricane Katrina, the Louisiana Department of Insurance received more complaints against Allstate (1200) than any other insurance company which was almost twice as many as State Farm which had a bigger market share.[10]

Allstate has argued that the changes to claims practices was just for efficiency, but former CEO Jerry Choate admitted in 1997 that Allstate had reduced payments and increased profits, “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.”[11]

For years, Allstate refused to produce documents about its claims practices. In Florida, regulators finally ran out of patience and suspended Allstate from writing new business in Florida until the documents were produced. In April 2008 Allstate produced 150,000 documents relating to its claim review practices, but many commentators believe critical documents are missing.[12]

Allstate’s “boxing gloves” tactics boosted its bottom line. In the 1990’s Allstate paid out 79% of its premium income compared to just 58% ten years later.[13] For auto claims they now only pay out 47%.[14] 2007 profits of $4.6 billion are more than double the 1990’s profits. In fact, Allstate has so much cash it started buying back $15 billion worth of its own stock at the same time it was threatening to reduce homeowners coverage because of hurricane losses.[15] Allstate has stopped writing homeowners policies in Delaware, Connecticut, and California as well as coastal Maryland and Virginia.[16]

In Florida, Allstate has dropped over 400,000 homeowners since 2004.[17] In California, where State Farm and Farmers agreed to cut rates, Allstate demanded double digit increases in what the former Insurance Commissioner described as an exit strategy so they simply wouldn’t have to write any more policies.

Consumer advocates also accuse Allstate of putting ambiguous clauses in homeowner’s policies that deceive policyholders into thinking they have wind damage coverage when they don’t. So called “anti-concurrent-causation” clauses state that wind and rain damage (which is covered under the policy) is excluded if significant flood damage occurs as well. So, policies with wind and rain damage coverage and “hurricane deductibles” would find out after a catastrophic loss, that they had no coverage.[18] In 2007, then U.S. Senator Trent Lott sponsored legislation to stop this kind of abuse that required plain English summaries in policies that explained exactly what was and was not covered. “They don’t want you to know what you really have covered,” said Lott.[19]

---

1 “In Tough Hands at Allstate” Business Week, May 1, 2006

[2] Insurance Information Institute

[3] Insurance Information Institute

[4] “CEO’s rake in cash but not stock” National Underwriter, January 2, 2008

[5] Charles Duhigg “Aged, Frail, and Denied Care by their Insurers”, The New York Times, March 26, 2007

[6] CNBC, April 2, 2008

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