Here’s an interesting factoid: 70% of insurance industry employees have attended “on-line happy hours” since the pandemic’s start – more than just about any other group in America. Honestly, if I worked in a morally bankrupt industry trying to take advantage of a lethal pandemic, economic collapse and civil unrest, I might turn to alcohol too.
Actually, I have found that drinking helps get through the infinite number of online insurance industry webinars that I’ve listened to lately, where representatives try to explain the importance of exploiting these multiple crises. If there is one thing these companies know how to do, it’s holding onto money. In fact, the property/casualty insurance industry has stored away so much excess profit that it now sits on more surplus than at any time in history – a record level of well over $800 billion, which doubled from 2004 to 2018, quadrupled since 1994, and has risen by more 5,000% over the past 60 years.
One of my favorite recent webinars was the May 19 presentation featuring insurance defense lawyer Ellen Greiper and James Dorion of insurance consultanting firm Willis Towers Watson, among others. They explained that while the backlog of cases due to pandemic-related court closures is, for most people, a troubling development, for insurance companies it could be a downright bonanza. In fact, it seems this is their ultimate fantasy come true. With no level playing field - in fact no playing field at all - insurance companies can finally force injured people to accept their lowball settlement offers.
A giddy Ellen Greiper put it this way: “I have had a flurry of phone calls, I would say in the last two weeks, from plaintiffs who are now willing to take that [settlement] amount I had offered before.… Those plaintiffs are realizing that they are not going to get a trial for at least two years [and they] may be out of a job now, or may be losing money that want to settle.” Echoed Mr. Dorian, “I’ve heard almost across the board from claim leaders at major insurance markets saying that they’re seeing opportunities and looking to capitalize on them where they can settle things more advantageously than they would’ve been able to a couple quarters ago.” (emphasis added).
Thank goodness for the California Department of Insurance, which is trying to get ahead of this cheating racket by sending notices to insurance companies, telling them that it is a violation of the California Unfair Practices Act to exploit the closure of the court system “by offering financially strapped claimants low settlements.”
“The department has been informed that some insurers and other persons engaged in the business of insurance in this state are unfairly taking advantage of the COVID-19 crisis and providing unjustifiably low settlement offers knowing financial need is high and recourse to the civil court system in the state is currently severely limited,” the notice said. “The department has also been informed that certain insurers and other persons engaged in the business of insurance in this state are lowering or failing to make settlement offers with full knowledge that, because of the reduced California court schedules, policyholders are unable to obtain prompt redress in the California court system.
“This lack of access to the California court system puts policyholders who are already in severe financial hardship at a disadvantage and vulnerable to unjust settlement practices,” it said.
Of course, low-ball settlement offers aren’t the half of it. The way this industry is trying to argue their way out of paying claims to their small business policyholders is utterly breathtaking. Take business interruption insurance, which is meant to cover business losses. Many businesses dutifully paid premiums for this coverage for years. They are now being told their policies cover neither losses due to the pandemic lockdown nor civil unrest that may have also forced businesses to close.
First, ever since the nationwide lockdown, this cash-rich industry has been insisting they owe nothing to their business customers who paid premiums to cover business interruption losses. (See our earlier post.) They say either that the fine print in policies exempts virus-related business losses entirely, or even if it doesn’t, still limits what they owe because these businesses suffered no physical damage from a virus.
Now that there is physical damage due to civil unrest, they’ve come up with new escape valves. For example, some say they will deny claims by arguing that if there are two concurrent causes for a business to be closed (i.e., pandemic and looting), they’ll only pay if the covered reason (say, looting) is the predominant cause of the shutdown. If not, they don’t have to pay a dime. And if they can’t get away with that, they’ll go the low-ball route and refuse to pay really what they owe saying essentially that since businesses are already losing money due to the virus, they are not making much anyway. That means less for insurers to restore. I mean, you could go in circles all day finding your way out of this logic. Former industry spokesperson Robert Hartwig summed up the windfall they expect over all this by saying that by refusing to pay what they owe, “The pandemic could cut industry losses from the civil unrest in half, from about $1 billion to $500 million.” Whoop di doo.
But don’t pop the champagne cork yet, Mr. Hartwig. On June 4, the Consumer Federation of America brought this whole con job to light, calling on all major insurance companies to “not take unfair advantage of a two-pronged crisis that is wreaking havoc on so many small businesses in America” and “to pledge not to deny or underpay business interruption claims resulting from riots or civil disorder from businesses also impacted by the COVID-19 pandemic.” They said,
We write to ask you to make this very simple pledge to the businesses you insure across the country:
We pledge that our insurance company will not deny business interruption claims resulting from a riot or civil disorder because a business has been shuttered as a result of the pandemic or on the basis of a previous decision to deny a business interruption claim based on a virus exclusion in our policy.
We further pledge not to reduce the amount of payment available on business interruption claims resulting from a riot or civil disorder below the amount that would have been paid prior to the pandemic.
Hopefully state insurance regulators or lawmakers will take notice and get involved. I’d like to believe the industry would do the right thing on its own, but these are the same people still obsessing over a case they lost nearly a year ago involving a grandmother and grandchildren killed in a head-on tractor-trailer crash. On top of that, they have decided that now is a great time to price-gouge their customers with rate hikes even though the industry is still sitting on record-breaking mountains of cash and claims have dropped due to greatly-reduced accident frequency.
But maybe instead, they’ll decide to treat their customers fairly, act honestly, and do the right thing. Maybe they’ll try to restore their reputation and no longer be one of the most detested industries in America. Maybe they will step up and help this country at a time of multiple crises instead of finding ways to hurt us…
Naaaaaaaahhh! (Video below in honor of J. Robert Hunter.)
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