In a damning 18-page report, Bloomberg exposes how the insurance industry’s systematic use of sleazy scare tactics cheat vulnerable policyholders.
For instance, in the 90’s Allstate hired the McKinsey business consulting firm on how to increase profits, and several of the slides McKinsey created have shown up as evidence in lawsuits against the insurance company.
One entitled, “Good Hands or Boxing Gloves…”
…said that All State should first make a lowball offer and if the client accepts it, treat them awesomely. If the client objects or hires a lawyer, then Allstate should put on the boxing gloves and beat on them.
Another was called “Sit and Wait,” and showed an alligator. The slide said Allstate could thwart claimants by stalling paying out settlements and prolonging court proceedings. By holding onto money longer, Allstate can invest the float and often frustrate clients into shutting up.
Other tactics include:
- Changing policies retroactively
- Changing engineering reports (hello, Katrina!)
- Denying fire claims based on arson when no evidence exists to that effect
These methods have spread to other insurance companies, the article reports, and the industry has run amok. Is it time for a regulatory body, like the SEC for the banking industry, to oversee the insurance industry?
Photograph: Tim and Michele Ray pose in front of their tornado damaged home in Hendersonville, Tennessee, on March 13, 2007. Photographer: John Chiasson/Bloomberg News.
Home Insurers’ Secret Tactics Cheat Fire Victims, Hike Profits [Bloomberg] (Thanks to Greg!)