August 21, 2007

The Insurance Hoax


Property insurers use secret tactics to cheat customers out of payments--as profits break records.
By David Dietz and Darrell Preston

When there's a disaster, the companies homeowners count on to protect them from financial ruin routinely pay less than what policies promise. 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.

The insurance companies routinely refuse to pay market prices for homes and replacement contents, 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.

This is contested by Robert Hartwig, chief economist at the Insurance Information Institute. He says about 1 percent of policyholders contest what they're offered. Do we have the financial ability to fight a long case?

Then there is Katrina...the article goes on to say
The August 2005 storm killed more than 16,000 people in Louisiana and Mississippi, left 500,000 people homeless and cost insurers $41.1 billion. More than 1,000 homeowners sued their insurers in the wake of the storm--the largest- ever number of insurance lawsuits stemming from a U.S. natural disaster.

For insurers, the multibillion-dollar question regarding Katrina was how much of the destruction was caused by wind and how much by water. Property insurance policies don't cover damage caused by flooding; homeowners have to purchase separate insurance administered by the U.S. government. The wind/water issue has spurred allegations that insurers manipulated the findings of adjusters and engineers.
Even the former Federal Flood Insurance Commissioner felt that the claim,s settlement procedure was skewed in favor of the insurance companies. David Dietz is a senior writer at Bloomberg News in San Francisco and did an excellent expose of the P& C industry.

Your Property Path: When Katrina first happened I thought that insurance stocks would drop like a rock. Not so...at first I couldnt understand and then it became clear. Unless you had Federal Flood Insurance the property and casualty companies didnt have to pay for flood damage. Now the claimant contest was whether the damage to many of those homes was caused by the storm surge or wind and rain...anyway you get the picture. I just wonder how many of the reps that sold homeowners actually made that clear .


Howard Bell for Your Property Path

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