CNN host Anderson Cooper recently created a two-part series on the business practices of the nation’s largest property/accident insurance company and Allstate Insurance. It was the culmination of an 18-month CNN investigation into minor soft-tissue injuries across the country. The series was then broadcast on CNN. The video links to the two segments are listed below.
These three major insurance companies joined forces (add Liberty Mutual) and hired legendary business consulting firm McKinsey and Company. McKinsey, in their usual fashion, looked at insurance companies’ business practices and made recommendations on how to increase profits in a report entitled “The Three Ds: Delay, Deny and Defend.”
When delaying a claim, insurance companies place significant financial pressure on a policyholder or claimant. That pressure can force a policyholder or claimant to accept a much smaller claim settlement amount.
By denying a claim, insurance companies force policyholders and claimants to seek legal counsel. Many personal injury attorneys are reluctant to hire a client for a small loss, as attorneys often work with contingency schedules. So in the absence of proper legal representation, policyholders and plaintiffs are once again forced to accept “lowball” settlement amounts from insurers.
When defending a claim, the insurance companies take the position of forcing the policyholder first into the review process found in most policies. This requires each side to elect a representative, and then the representatives and arbitrator choose. The agreement of two of the three chosen forms the claim amount. But this will add months to any claim process. The next step for the policyholder or claimant is to file a lawsuit. This will add years to the final settlement… if they can find and pay for legal representation.
Insurance companies have taken this stance with the intention of making the legal process so expensive for personal injury lawyers that they become even more reluctant to take on new clients for small business.
So far, the “slow down, decline, and defend” tactics have been wildly successful for every insurance company that has adopted the tactic. Industry profits have risen significantly in recent years, despite major catastrophic events such as Hurricane Katrina and other Gulf Coast hurricanes since 2004.
Here are the links to the CNN reports.
Anderson Cooper, part one
Anderson Cooper, part two