How Insurance Companies Deny, Delay, Confuse and Refuse
What are some of the tactics used by insurance companies to make money at the expense of consumers? "Some of America's most well-known insurance companies-the same ones that spend billions on advertising to earn your trust-have endeavored to deny claims, delay payments, confuse consumers with incomprehensible insurance-speak, and retroactively refuse anyone who may cost them money." This is quoted from "Tricks of the Trade: How Insurance Companies Deny, Delay, Confuse and Refuse," a research report recently released by the American Association of Justice. The report outlines six tactics that target insurance policyholders, identifies the insurance companies that are engaging in these practices, and lays out what consumers can do to prevent abuses and fight back. We invite you to read this report to learn more about insurance company tactics and how to protect yourself.
Here is a snapshot of the report in the Executive Summary:
"The U.S. insurance industry has trillions of dollars in assets, enjoys average profits of over $30 billion a year, and pays its CEOs more than any other industry. But insurance companies still engage in dirty tricks and unethical behavior to boost their bottom line even further.
The current economic turmoil affecting the insurance industry on Wall Street has only made the outlook bleaker for consumers living on Main Street. Insurance companies are likely to demand huge rate hikes and refuse more claims than ever. Some of America's most well-known insurance companies-the same ones that spend billions on advertising to earn your trust-have endeavored to deny claims, delay payments, confuse consumers with incomprehensible insurance-speak, and retroactively refuse anyone who may cost them money.
This report describes some of the most egregious ways the insurance industry attempts to make money at the expense of consumers. These are some of the tricks of the trade:
Some of the nation's biggest insurance companies - Allstate, AIG, and State Farm among others - have denied valid claims in an attempt to boost their bottom lines. These companies have rewarded employees who successfully denied claims, replaced employees who would not, and when all else failed, engaged in outright fraud to avoid paying claims.
Delaying Until Death
Many insurance companies routinely delay claims, knowing full well that many policyholders will simply give up. Some have gone so far as to lock paperwork away in safes. Undoubtedly, the most shameful use of delay tactics has been by long-term care insurers, who often take advantage of their policyholders' age and ill health. In the words of one regulator, "the bottom line is that insurance companies make money when they don't
pay claims...They'll do anything to avoid paying, because if they wait long enough, they know the policyholders will die."
Insurance contracts are some of the most dense and incomprehensible contracts a consumer is ever likely to see. More than half of all states have enacted "plain English" laws for consumer contracts, yet many Americans still do not fully understand the risks they are subject to. After Hurricane Katrina, insurance companies used obscure "anti-concurrent" clauses to get out of paying claims. Consumers who purchased hurricane insurance and thought they were covered suddenly found the coverage eliminated by an obscure clause they could not hope to understand.
Discriminating by Credit Score
Increasingly, insurance companies are using credit reports to dictate the premiums consumers pay, or whether they can even get insurance in the first place. The practice penalizes the poor, senior citizens with little credit, and those who have suffered financial crisis through no fault of their own. Insurance companies have denied fiscally responsible people who paid their bills in cash, but refused renewals because of a lack of credit history. Others have seen auto rate hikes near 600 percent despite clean driving records after falling on economic troubles.
Abandoning the Sick
Health insurers looking to cut costs have taken to canceling retroactively, or rescinding, the policies of people whose conditions have become expensive to treat. Some insurance companies have even offered bonuses to employees who meet "cancellation goals." Rescission targets patients in the midst of treatment when they are at their most vulnerable-even cancer patients in the midst of chemotherapy have been targeted.
Canceling for a Call
Many people are rightly reluctant to make small claims on their home insurance for fear their insurance company will raise their premiums. But few realize that insurance companies often refuse to renew a policy because the policyholder did as little as inquire about the possibility of making a claim. Many times an insurance company will count an inquiry over the phone as the same as a claim, and then they will do everything in their power to drop the policyholder.