Posted Aug 03, 2007 08:47 pm CDT
Despite having had to cover Hurricane Katrina, the worst U.S. disaster in the history of insurance, carriers are earning record profits. One reason why is that many don’t pay claims to the extent promised in insurance policies, a news agency says.
“Insurers often pay 30-60 percent of the cost of rebuilding a damaged home—even when carriers assure homeowners they’re fully covered, thousands of complaints with state insurance departments and civil court cases show,” contends Bloomberg in a lengthy special report today.
“The insurance companies routinely refuse to pay market prices for homes and replacement contents,” the article says, “they use computer programs to cut payouts, they change policy coverage with no clear explanation, they ignore or alter engineering reports, and they sometimes ask their adjusters to lie to customers, court records and interviews with former employees and state regulators show.” The article cites, in particular, court records in California, Florida, Illinois, Mississippi, New Hampshire and Tennessee.
And the problem is likely to continue, experts tell Bloomberg, because there is currently no industry-wide enforcement mechanism strong enough to counteract the profit incentive that encourages insurers to lowball insurance claims.
“Fines by state regulatory agencies have been far too small and infrequent to deter unfair business practices,” says Amy Bach, executive director of San Francisco-based United Policyholders, a consumer claims adviser. “It’s clear that cheating by insurers is a big, profitable business, and regulators can’t muster the will or political strength to stop them.”