Bloomberg News Reveals Insurance Secrets to Obscene Profits

by Ana Maria

From the Mississippi Gulf Coast to the Mid-West to California, insurance companies routinely low ball claims estimates at a time when policyholders are most vulnerable. Bloomberg News recently published Home Insurers' Secret Tactics Cheat Fire Victims, Hike Profits, a riveting and insightful article that disclosed the industry’s dirty, unknown secrets.

''Fighting an insurance company is like staring down the wrong end of a cannon,'' Dr. Bennett said after fighting his insurance company. The New Hampshire physician lost his five-bedroom home in a 1993 fire filled with antiques and fine art. Replacement costs? $20 million. The insurance company offered $1.7 million. Not quite 20% of the policy’s worth.

Through his 11-year battle, Dr. Bennett’s attorney found out this shocking piece of information. After the fire destroyed Dr. Bennett’s home, his insurance company changed the “replacement cost” of the policy. A retroactive policy change stripped Bennett of coverage he had bought?! Bennett ended up settling with his insurance company for an undisclosed amount. But he shouldn’t have had to fight his insurance company in the first place. Our laws should be strong enough on their own to force the company to do right by us.

On the other side of the country in San Diego, Calif., a 2003 fire swept through a wealthy subdivision of 30,000 where property values were at least $1 million. “The Southern California fires led to 676 formal complaints to the state saying insurers offered payouts that fell far short of actual costs and delayed on paying claims.”

Here in the Katrina-ravaged region, the industry has again used its low ball, starve the policyholder tactic.

Whether we’re in the Northeast, on the West Coast, or the Gulf Coast, the insurance industry routinely implements a set of practices the purpose of which is to rip off policyholders with legitimate claims and to keep our premiums in the insurance companies’ coffers, an industry secret to obscene profits.

The industry refers to this money as profits. But you and I think of profit as the amount of money after bills have been paid. The industry looks at robbing us of our legitimate insurance claims as a way to inflate their profits through failing to pay their bills. And they have been getting away with it for too long.

The Bloomberg News article describes in great detail various tactics the industry uses including rewarding claims adjusters for deliberately scamming customers out of the money they are owed. With examples from New Hampshire, Illinois, Mississippi, and California, the Bloomberg article demonstrates definitively that this is a national problem.

The questions, of course, are what is the solution, and how do we achieve it? The answers involve both state and federal action.

Federal Answers to the National Insurance Crisis
On the national level, we already have two very forward thinking proposals on the table.

The Senate’s Democratic Leaders have put together legislation to strip the insurance companies of its 62-year old exemption from the nation’s anti-trust laws. This legislation will bring the insurance industry into alignment with every other industry in the country and require that it be subject to the same laws that protect residential and commercial consumers from corporate price-fixing behavior and other unsavory industry-wide business practices.

U.S. Senators Mary Landrieu (D-LA) and Senate Minority Leader Trent Lott (R-MS) are among this bill’s co-sponsors. The proposed law will finally make price-fixing behavior in the insurance industry illegal. The companion bill in the House is H.R. 1081. Contact your senators and congressional representatives to let them know you support this legislation.

The second forward thinking piece of legislation is the Multiple Peril Insurance Act, which will expand the federal flood insurance program to include windstorms as well. Big insurance scammed American policyholders in the Gulf Coast region from Alabama through Louisiana by pretending that the 135 miles per hour winds that battered homes and businesses for up to four hours before the water came ashore caused not a penny of damage. This is the basis for the industry-created water/wind scam. For a good explanation on that, read Wind? Water? More Like a Bunch of Hot Air!

Gulf Coast Congressman Gene Taylor (D-MS) drafted the Multiple Peril Insurance Act, which will protect consumers from insurance companies blame wind damage on water. To date, the bill passed out of the subcommittee along party lines—meaning all Democrats voted for it and all Republicans voted against it. The bill passed out of committee with all Democrats voting for it and a few Republicans joining the Democratic leadership in protecting their constituents. Now, the legislation will be voted on by the entire House of Representatives sometime this fall.

These are all very amazing and critical steps taken to protect home and business owners regardless of whether we live in a modest home in Slidell, Louisiana, (which also got hit hard in Katrina) or Oklahoma. Taking the wind out of the insurance industry’s ability to scam American policyholders is important because when they weasel out of paying legitimate property damage claims, it's simply a form of robbery.

We have to have a level playing field for consumers from the national level. That is the reason for national legislation. We can also do things to assist at the state level. At this point, both are required.

Statewide Answers to the Insurance Crisis
On a state level, we can elect insurance commissioners who will actually fight successfully to protect us. Here in Mississippi we have a great example of an insurance commissioner—George Dale-who has merely rolled out the red carpet for the insurance companies to walk all over policyholders. If Dale had been doing his job, Katrina’s survivors wouldn’t have needed to go to lawyers like Dick Scruggs and his Scruggs Katrina Group or to the Merlin Group or to the Mississippi Center for Justice. Because George Dale didn’t do his job to protect residential and commercial insurers, those lawyers are doing his job for him. We are all so very thankful that these lawyers are skilled to take on the insurance industry.

However, had George Dale done his job, Katrina’s survivors would have had their money already. The construction boom would have already begun. The Katrina-ravaged region would already be in the middle of coming back into full swing. If George Dale had done his job, the Scruggs Katrina Group would have been unnecessary to create.

The point here is that on the state level we need to fire people like George Dale and hire officials like Gary Anderson.

Tomorrow, Mississippians have a chance to go to the polls, pick up a Democratic ballot in the primary election, and vote for Gary Anderson who will make a great insurance commissioner who will dedicate his tenure to protecting American residential and commercial consumers.

We have to have public officials who will protect consumers. We need to do this in Mississippi, California, New Hampshire, and throughout all 50 of our states.

Electing Gary Anderson in tomorrow’s primary election will be a major step forward for civil rights as we close another chapter of the good ol’ boy way of doing business. Electing Gary Anderson will be a major wake up call to the insurance industry and a major step forward for residential and commercial consumers. A new way of doing business which will really be what’s good for America.

Today’s Three Political Hell Raising Activities
Today, we’ll contact our elected officials in the U.S. House of Representatives and Senate as well as help elect Gary Anderson as our Democratic nominee for Insurance Commissioner in Mississippi.

Here are our phone scripts and email letters for our two U.S. Senators. We’ll tell them that we want to protect our families and businesses from being victims of price-fixing and other business shenanigans that the insurance industry is currently permitted to do.

Next, we’ll contact our congressional representatives to let them know that we want to protect our families and businesses through supporting the Multiple Peril Insurance Act. Here is a phone script and email letter to use as desired. Of course, contact information is available at the click of a button!

Today’s third hell raising activity will help elect Gary Anderson in tomorrow’s primary. Please call (615) 414-2965 or (601) 973-3834 and ask for Will. If he is not available, talk with whomever answers the phone. Tell her/him that you want to get a list of names and numbers to phone bank to turn out the vote.

This race to put in office Gary Anderson, a real Democrat, comes down to voter turnout. Every contact with voters to remind them of Tuesday's election is critical. One last thing, be sure to tell them that A.M. in the Morning! sent you!!

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