Trial Lawyers Name Top Ten Worst Insurers: Hatchet Job or Food for Thought?

David Letterman has a Top Ten list. Now, America’s trial lawyers have theirs.

The trade group formerly known as ATLA – American Association for Justice – has released a list of the ten worst insurance companies in a free white paper, “The Ten Worst Insurance Companies in America.” (Download at http://www.justice.org/docs/TenWorstInsuranceCompanies.pdf)

Drum-roll, please … Here is the list

1. Allstate
2. Unum
3. AIG
4. State Farm
5. Conseco
6. WellPoint
7. Farmers
8. UnitedHealth
9. Torchmark
10. Liberty Mutual

Some observations. First, the list contains a mix of P&C carriers, health insurers and specialty niche carriers.

Second, claim services (or lack thereof) figure prominently in making the list. Other factors include marketing and underwriting practices, poor corporate governance, etc.

Third, a unifying theme of many case studies is the existence of strong financial incentives for adjusters to deny claims. It refers to incentive plans where adjusters get free portable refrigerators for leading the office in claim denials. For example, it asserts that AIG locks claim checks in vaults, delays paying defense attorneys for a year and holds pizza parties to destroy documents.

Three of the Top Ten had retained management gurus McKinsey to come in and figure out how to pay fewer claims.. The “good hands” were replaced by boxing gloves in campaigns designed to delay, deny and defend claims. Good hands? No, but some consumers did think they got the good finger.

It will be interesting to see what if any industry response is forthcoming. Folks within insurance often wonder why that industry does not enjoy a better public image. I have heard and seen no rebuttal to the AAJ white paper. Surely there is an insurance trade group that can muster a response. To let this critique go unanswered would seem to be damming.

To be sure, this is one side of the story only. “The flattest pancake has two sides” and perhaps each company on the list has its own response. If so, let’s hear it. Insurers have no monopoly on problems. When it comes to excoriating greed, the plaintiff's bar can be caught living in their own glass houses as they toss rocks. Witness the shenanigans of Dickie Scruggs and Bill Lerach, for instance. At least CEO’s usually have shareholders to answer to.

When I first heard of the AAJ Top Ten list, I tended to dismiss it, unread, thinking maybe it was a badge of harbor being so named. So personal injury lawyers hate insurers. Big news!

On further reflection, I urge all claim folks – especially those in upper management – to read the report to gauge how financially driven metrics can be over-weighted to produce dubious results.