A recent uptick in auto and casualty insurance company television ads caught my eye. One company in particular advertises that they are the nation’s largest. I checked Allstate’s website, and they are. A Fortune 100 company, Allstate reports $133 billion in assets. In the U.S., they are the big dogs when it comes to “personal line” insurance. Personal line refers to insurance for personal property, liability and for medical care after an accident.
Checking further, I found that profits are up. Remember the financial crash of ’08? That hit insurance companies hard because many were heavily invested in stock market instruments that fell. But, according to the Insurance Journal, by November of ’09, “Allstate Corp., the largest publicly traded U.S. home and auto insurer, reported a third quarter profit Wednesday, the improvement from a year ago loss made possible by lower catastrophe and investment losses.”
That last bit is important – “lower catastrophe and investment losses.”
A year later, in Oct of 2010, Business Week reported, “Allstate Corp., the largest publicly traded U.S. home and auto insurer, said third-quarter profit rose 66 percent as investment losses narrowed.” This was, again, in part due to lowered claims. Some actually came from a bad economy that had fewer miles driven (who could afford to take a vacation?) and less auto accident claims as a result. Generally, your automobile insurance premium is based on the value of the vehicle and coverage and not linked to the number of miles you drive.
The theme here is important. While profits may be impacted by a downturn in the stock market, one of the key movers of the bottom line is claims. If you are an insurance company, you want to reduce how much you pay out. It’s that simple.
History shows how profits tempt
It’s long been known in the insurance industry that streamlining claims processing can increase profits. In the 1990’s Allstate hired a consultant to tell them just how to do it. One of the more significant suggestions to come out was that claims could be reduced by aggressively fighting with litigation designed to lower payouts.
David Berardinelli, a lawyer involved in suits against Allstate, the method was to delay and deny claims to pressure claimants to settle for amounts less than they were due. He referred to this strategy as switching from the “good hands” to the “boxing gloves.” As part of this litigation, documents revealed some interesting quotes from Allstate’s consultant:
· Establishing new market values [for claims] will require aggressive new litigation strategies.
· Capturing the opportunity will require reducing the number of represented claimants and more aggressively managing the claims that do become represented.
· Many plaintiff attorneys yield to more aggressive tactics.
· Claims is an economic game. We will win the economics game.
· Aggressive litigation yields positive results… UM/UIM [uninsured motorist/under insured motorist] severities can be lowered on average by 12% through aggressive litigation tactics.
The material goes on, but the theme is to play hardball with clients and their attorneys to reduce settlements.
Fast forward
This material came out because a skilled attorney investigated Allstate and uncovered it. It actually was rediscovered over and over again but kept private as part of settlement offers. The whole picture was only made public after a State Insurance Regulator got involved.
Thankfully, in Montana, we have laws that can penalize an insurance company for fraudulent business practices. They can be sued if they act unethically. Unfortunately, many of the policies recommended to Allstate are not illegal. They may be distasteful and feel like kicking a victim when they are down, but they remain legal.
The solution for those who have been injured and will have to fight to get what they are due is the same as it always was. Aggressive litigation has to be met with a powerful case that supports the claim. Only an attorney willing to “go to the mattresses” will do. When an attorney has a strong case and a reputation for being aggressive for his clients, it is actually in the insurance company’s interest to come to terms. They aren’t stupid. When a good attorney is involved, and the facts justify a substantial award, there may be no choice but to settle for a full and fair amount.
What hasn’t changed
As the economy gradually improves for the rest of us (lagging far behind the insurance industry) the same considerations will apply. Victims will continue to make claims and those claims will continue to be held to as low a payout as possible in the name of corporate profits. This won’t change. The need for a savvy attorney to handle a high-value insurance claim won’t change. The little guy will continue to bear the burden and the big guys will keep trying to get legislation in their favor. This won’t change either.
I’ll continue to fight for my clients and get them what they deserve, regardless of the tricks insurance companies want to play. That won’t change either.
About Solomon Neuhardt: Solomon Neuhardt is the owner and lead attorney at
Neuhardt Law Firm, a member of the American Bar Association, the American Association for Justice, and represents individuals and families in personal injury cases, including accidents, medical malpractice, defective products, dog bites, and insurance disputes.