When we purchase insurance, we’re buying a promise on a piece of paper. We uphold our end of the bargain by paying our hard-earned dollars for premiums, and we expect that insurers will uphold their end by paying our claims if tragedy strikes. Too often, however, insurers betray the trust of vulnerable policyholders. Not content to just profit off of the gains they reap when they invest our premiums – using our money to fund their stock portfolio – insurers have turned claims into an additional profit center by using “delay, deny, and defend” tactics. These bad faith practices are an illegitimate and illegal way for insurance carriers to pick their policyholders’ pockets.
The global corporate consulting giant McKinsey & Company showed the way. McKinsey advised insurance giant Allstate, which markets itself as the “good hands” company, to give policyholders who sought to receive full value for their claim the “boxing gloves” treatment. McKinsey devised a scheme to intentionally and needlessly delay the claims process, deny that the policy covered the claim, and frivolously defend even minor claims in court. By dragging out the claims process and engaging in scorched-earth litigation tactics, insurers would be able to personally benefit by holding on to premium dollars for longer, giving them more time to profit off of investment gains in the stock market, which is commonly known as “the float” in insurance circles.
And by pummeling their policyholders, insurers would also exploit their customers’ financial vulnerability after a loss, ultimately resigning them to take pennies on the dollar as a settlement. Delay increases the pressure for the policyholder to settle for little, and less money paid out for claims equals more dollars in the insurance companies’ pockets. This is the same mindset that led the big insurer Unum to recognize their employees who were most aggressive in denying claims with their “Hungry Vulture Award.”
The only thing that stands between policyholders being victimized twice – once by the loss and again by their greedy insurer – are strong bad faith insurance laws that punish and deter these despicable practices. The vulture culture displayed by insurers threatens the financial security of middle and working class Texas families, and it has to stop. Here’s what you can do:
- Know your rights: Read the Consumer Bill of Rights for Texas homeowners and auto policyholders at http://www.tdi.texas.gov/commish/rights.html.
- Make a complaint: The Texas Department of Insurance probably won’t help to resolve your complaint with an abusive insurance company, but at least the company’s bad behavior will be recorded. Call 1-800-252-3439 or see http://www.tdi.texas.gov/consumer/complfrm.html.
- Seek counsel: If you suspect an insurance company is low-balling or stonewalling you, get the advice of an attorney who is experienced in insurance bad faith law. The insurance company has its own army of lawyers, and it isn’t a good idea to walk into a gunfight unarmed.
Missed an installment of our Insurance Myths series? Catch up here.