Insurers Being Coached On Profit Making
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UPDATED: Jun 19, 2018
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Just as an actor is coached on perfecting his craft, insurers are reportedly being coached on perfecting theirs – and the result is less than consumer-friendly. In a recent Bloomberg news article, it was reported that insurance companies have allegedly hired consultants to show them how to increase their profits in any way possible.
Down and dirty
According to the Bloomberg article, many of the larger insurance companies in the United States (and around the world) have hired a company called McKinsey & Company to take a look at their practices. McKinsey is a well known New York consulting firm that has been known for coming into companies and assisting management in ‘reorganizations’ – a nice term that really meant layoffs. Apparently, many insurance companies took their relationship with McKinsey a step farther.
Court documents have shown that McKinsey devised ways in which insurers could save money across the board. Unfortunately for consumers, the number one way to save money was to avoid paying claims. It has been reported that McKinsey advised insurers to continue telling policyholders that they would be covered, but they should make ‘low ball offers’ when policyholders made claims in hopes that the offers would be accepted and insureds would simply go away. McKinsey also allegedly told insurers that they should discourage claimants by delaying settlements and stalling court proceedings as the longer they held onto a claimant’s money, the more they would make in investments.
The McKinsey reports
One of the major insurance companies allegedly convinced a judge to seal the McKinsey information – which means that it cannot be revealed to the public. The insurer claimed that the reports contained ‘trade secrets.” However, another court later ordered the insurer to produce the documents and fined the insurer $10,000 for not complying. That case has made its way to the Indiana Supreme Court, although there has yet to be a ruling.
Although insurers deny the drastic measures alleged in the McKinsey reports, their profits have soared over the past few years. In fact, according to the Insurance Information Institute (III), the insurance industry reported record profits in 2006 – a whopping $73 billion in the property-casualty market alone. Interestingly, the III also reported that claims payments for the same market have consistently decreased. In 1994, property-casualty insurers paid out 64% of their received premiums in claims, but only 55% in 2006.
If your insurance company has denied a valid claim and you can’t resolve the matter, contact an attorney whose practice focuses on insurance claims to help. If you are a victim of insurance bad faith, the Advocate Law Group can help you. [Sponsored Link]