CEOs from major insurers like Allstate, State Farm, and Liberty Mutual collaborated with McKinsey & Co. to create a strategy focused on delaying claims, denying coverage, and forcing litigation. This “lawfare” against consumers has persisted, leading to widespread denial of claims while insurance prices continue to rise.
Several factors contribute to this issue:
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Tort Reform: There should be a cap on damages that aligns with insurance policy limits. Current large verdicts can negatively impact smaller claims, which are frequently denied. Many individuals face minor incidents that result in claim denials, but they lack the resources to pursue them, affecting those living paycheck to paycheck. Additionally, there should be limitations on plaintiffs’ legal fees, especially in class action cases.
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Prosecution of White Collar Crime: Consumers often face suspicion of fraud for service-related issues. When people lose faith in the system due to insurers’ tactics, they may circumvent rules. Without accountability for top executives, consumer trust in the industry erodes.
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Ending Lawfare Against Policyholders: A forensic audit of judges involved in significant cases is necessary. We need to revert to the policy forms of the 1980s, as coverage has been increasingly modified and reduced since then.
Improvements for the Industry:
- Establish a special watchdog fund to assist consumers against large insurers or self-insured businesses.
- Allow industry employees to unionize without fear of losing their jobs.
Many consumers feel insurers collect premiums for losses they never intend to cover, which constitutes bad faith. There should be an organization coordinating class action lawsuits against these insurers.
Insurance companies are seeking to raise their rates, a request that should be denied. These companies have made significant profits and can share the financial responsibility for covering claims related to disasters like floods and wildfires.
Overhaul of Agencies like FEMA:
- Launch an educational campaign to inform the public about the importance of insurance coverage, including the need for a home inventory to prove damages. This inventory should be prepared before disasters, and agencies should collaborate with the National Guard in disaster-prone areas to pre-register homes and businesses. Pre-loading essential documents for claims could greatly enhance disaster response efforts, as seen after Hurricane Sandy, Katrina, and others.
- Provide practical advice rather than textbook responses.