According to Highline Data LLC, a firm that compiles insurance industry data, property-casualty insurers (which cover damage claims for homes and cars) reported profits of $73 billion in 2006. Even in 2005, the year of Hurricanes Katrina and Rita, property-casualty insurers reported profits of $49 billion. The Consumer Federation of America recently reported that claim payouts as a percentage of premiums collected were at their lowest point in 50 years.  The Insurance Information Institute also confirms the continued decline in claim payouts. They report that in 1996, property-casualty carriers paid out 64% of collected premiums for claims. By 2006 this percentage had declined to 55%. Yet premium prices keep going up and we keep hearing insurance companies complaining about “catastrophic losses” as reasons for canceling coverage and increasing premiums.

In a great article called The Insurance Hoax, writers David Dietz and Darrell Preston, expose how property-casualty companies have been minimizing claim payouts to claimants with “hardball” tactics designed to wear down claimants. These tactics include data manipulation, over compensated expert witnesses and over zealous claims adjusters who receive bonuses and raises based upon how low they can settle claims. In example after example, Dietz and Preston show how insurance companies manipulate claims and try to bully claimants.

They also report on Allstate’s claim philosophy: Good Hands or Boxing Gloves. In a now well documented power point slide presentation, Allstate claims managers were told of Allstate’s new claim philosophy. When a claim is presented, adjusters are to make a low offer. If the offer is accepted, they should treat the claimant with “good hands.” But, if the offer is rejected then the claimant should get the “boxing gloves.” This latter position means that the claim should be drug out and delayed as long as possible. If the claim ends up in Court, then Allstate lawyers should delay the litigation process as long as possible with questionable defenses and stalling tactics. Another Allstate power point slide in the same presentation should an alligator with the caption: Sit and Wait. The idea being that delaying payments allows the company to hold money longer and make more on their investment while at the same time wearing down the claimant. In a recent article on this same subject, David Berardinelli reports that when Allstate first introduced this new hardball claim management philosophy, claim payouts were reduced by 60%. He now reports that claim payouts are as low as 40 cents on the dollar.

            These losses on claims are felt by the local communities. When an insurance carrier only pays out 40% of a claim, the claimant suffers the remaining loss. If the cost of repairs for a “covered loss” are $10,000 but the insurance company forces a hardball settlement of $4,000.00, then the claimant takes a $6,000.00 loss. This means either the homeowner diverts his own money to pay for repairs or does not make the repairs. Either way the local economy is divested of $6,000.00 which should have been paid by the insurance company. “Wall Street wins while Main Street loses,” said Mark Wolfe. Wolfe recently wrote an article that was published in the Mobile Press Register detailing how insurance companies have been placing profits for shareholders over the rights of policyholders.  To receive an-mail copy of any of the articles mentioned above, please contact Mark Wolfe at
mcw2@moore-wolfe.com.