Bar Group Report On Carrier Tactics Draws Insurers Fire

National Underwriter News
November 13, 2008

WASHINGTON -- A trial lawyers' trade group issued a report yesterday alleging insurers are using improper tactics against consumers to preserve the company bottom line, an accusation that was attacked by insurance interests.

The carriers are "preying on cash-strapped consumers" in order to improve profits, said the American Association for Justice, which represents trial lawyers.

Their report uses claims data, policies and news accounts to detail tactics that target policyholders, spotlight insurance companies it says are engaging in these practices, and advise what consumers can do to prevent abuses and fight back.

"The current economic turmoil, which is greatly affecting the insurance sector, will likely spark insurers to use these tactics to maximize their bottom lines," the report forecasted.

"Insurance companies are preying on cash-strapped consumers with tough tactics to increase profits," said Jon Habor, chief executive officer of the American Association for Justice. "The current challenges facing American families are only compounded when their insurance company plays hardball in their greatest time of need," he added.

But Blain Rethmeier, a spokesman for the American Insurance Association, which represents both domestic and foreign-based insurers, heatedly denied the allegations.

"If I'm not mistaken, a couple of prominent plaintiffs' lawyers have gone to jail in the last 18 months for their corrupt business practices," Mr. Rethmeier said.

"Perhaps the trial lawyer's association might want to focus inward on its own ethics before commenting on others," he said.

AAJ said that some of the nation's largest insurance companies are "systematically" denying valid claims; "delaying payment, sometimes until death"; confusing consumers; and discriminating by using credit scores to dictate the premiums consumers pay, or to decide if they can get insurance in the first place.

The report also contends that insurers are canceling customers just for making an inquiry about a possible claim.

"Many people are rightly reluctant to make small claims on their home insurance for fear their insurance company will raise their premiums," the report said. "But few realize that insurance companies often refuse to renew a policy just for making a phone call."

The report said, "Often, 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 you."

Insurance companies, the report said, are confusing consumers because "insurance contracts are some of the densest and [most] incomprehensible contracts a consumer is ever likely to see."

The report noted that 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."

Mr. Rethmeier of AIA said, "The property-casualty industry and our members hold themselves to the highest ethical standards as we provide essential security for individuals and businesses across America."

Jimi Grande, vice president, federal and political affairs, in the Washington, D.C. office of the National Association of Mutual Insurance Companies, said many of the allegations contained in the report appear to have been lifted from legal briefs filed by Richard Scruggs and other plaintiff attorneys who brought policyholder class actions in the aftermath of the 2005 Gulf Coast hurricanes.

"Mr. Scruggs, of course, is now a convicted felon, as are several other prominent members of the trial bar," Mr. Grande said. 

Mr. Grande charged that the "trial bar has invested heavily in recent elections and is now seeking payback."

Insurance is but one of several industries caught in the trial bar's crosshairs, he said.

"Public opinion has long been set against a more litigious society€”something even the trial bar understands as evidenced by the fact the organization recently changed its name," Mr. Grande said.

"Instead of repeating spurious allegations against the insurance industry that have already been widely discredited, the AAJ should investigate corruption in its own ranks," he added.

The Property Casualty Insurers Association of America (PCI) called the report "misleading."

David A. Sampson, PCI's president and CEO, said in a statement: "The evidence clearly demonstrates that America's property-casualty insurance companies do the right thing for consumers when settling claims€¦It is important for Americans to know, in these trying economic times, that insurers are financially strong, and that policyholders can be confident that our members can, and will, pay their claims during their hour of need."

He noted that the latest available statistics for 2007 showed property-casualty insurers had paid more than $243 billion in claims.

"There are always going to be things that we can do better, and we will never be satisfied with anything less than 100 percent performance," Mr. Sampson added. "But the evidence clearly shows that property-casualty insurers pay their policyholders' claims and help rebuild the lives of American families each and every day, and that is what we will continue to do in the future."

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