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Posted in Uncategorized on June 11, 2013
Beginning in the mid-1990’s, a new profit model within the insurance industry, combined with weaker regulations, have hurt consumers. The change began when McKinsey & Company sold their services to Allstate and other leading insurance companies; providing a new model to boost the bottom line. Instead of a traditional method of adjusting insurance claims, insurers began to embrace a computer based method of adjusting the produced low offers to claimants.
According to the new method designed by McKinsey, individuals who accepted low-ball offers recieved prompt service, while those who didn’t had their claims delayed and were potentially reduced to filing expensive lawsuits for their beneifts. As one former All State adjuster told the American Association for Justice, the strategy was to make claims “so expensive and so time-consuming that lawyers would start refusing to help clients.”
The strategy incorporated by Allstate and others has cetainly helped profits. In 2007, Allstate alone made $4.6 billion in provits, doubling its earnings from the 1990s. Such a profit increase comes from driving down loss valuse to an average of 30 percent below the actual market cost, according to Russ Roberts, a management consultant.
According to NAIC data, claim delays are the most frequent cause of policyholder complaints.
For more information on claim delays and the profits insurance companies make see this article.
In West Virginia, insurance companies are regulated by the unfair trade practices act and the West Virginia Insurance Commission. If your insurance claim has been unfairly denied, you may have a cause of action for bad faith practices against your insurance company. Our attorneys can help you navigate the unfair trade practices act and assist you in resolving your claim.