The Ten Worst Insurance
Companies In America
How They Raise Premiums,
Deny Claims, and Refuse Insurance
to Those Who Need It Most
To identify the worst insurance companies for consumers,
researchers at the American Association for Justice (AAJ)
undertook a comprehensive investigation of thousands of
court documents, SEC and FBI records, state insurance
department investigations and complaints, news accounts
from across the country, and the testimony and deposi-
tions of former insurance agents and adjusters. Our final
list includes companies across a range of different insur-
ance fields, including homeowners and auto insurers,
health insurers, life insurers, and disability insurers.
Allstate—The Worst Insurance Company
in America
One company stood out above all others. Allstate’s con-
certed efforts to put profits over policyholders has earned
its place as the worst insurance company in America.
According to CEO Thomas Wilson, Allstate’s mission is
clear: “our obligation is to earn a return for our share-
holders.” Unfortunately, that dedication to shareholders
has come at the expense of policyholders. The company
that publicly touts its “good hands” approach privately
instructs agents to employ a “boxing gloves” strategy
against its own policyholders.1 In the words of former
Allstate adjuster Jo Ann Katzman, “We were told to lie by
our supervisors—it’s tough to look at people and know
you’re lying.”
The Insurance Industry’s Wealth
• The insurance industry has so much excess cash it may
spark a downturn in the industry. According to ana-
lysts at Standards & Poor’s, U.S. insurers are sitting on
too much capital, and will likely endure at least three
years of negative performance as a result.2
1
Introduction
The Ten Worst
Insurance Companies
1. Allstate
2. Unum
3. AIG
4. State Farm
5. Conseco
6. WellPoint
7. Farmers
8. UnitedHealth
9. Torchmark
10. Liberty Mutual
• The U.S. insurance industry takes in over $1 trillion in
premiums annually.3 It has $3.8 trillion in assets, more
than the GDPs of all but two countries in the world
(United States and Japan).4
• Over the last 10 years, the property/casualty insurance
industry has enjoyed average profits of over $30 billion
a year. The life and health side of the insurance indus-
try has averaged another $30 billion.5
• The CEOs of the top 10 property/casualty firms earned
an average $8.9 million in 2007. The CEOs of the top
10 life and health insurance companies earned even
more—an average $9.1 million. And for the entire
industry, the median insurance CEO’s cash compensa-
tion still leads all industries at $1.6 million per year.6
Profits Over Policyholders
But some companies have discovered that they can make
more money by simply paying out less. As a senior execu-
tive at the National Association of Insurance
Commissioners (NAIC), the group representing those
who are supposed to oversee the industry, said, “The bot-
tom line is that insurance companies make money when
they don’t pay claims.”7
One example is Ethel Adams, a 60-year-old woman left
in a coma and seriously injured after a multi-vehicle crash
in Washington State. Her insurance company, Farmers,
decided the other driver had acted intentionally and
denied her claim, contending that an intentional act is
not an accident. Another example is Debra Potter, who
for years sold Unum’s disability policies until she herself
became disabled and had to stop working. All along,
Potter thought she was helping people protect their
future, but when her own time of need came, she was
told her multiple sclerosis was “self reported” and her
claim denied—by Unum, the very company whose poli-
cies she had sold.
In cases like these, and countless others, the name of
the game is deny, delay, defend—do anything, in fact, to
avoid paying claims. For companies like Allstate, there are
corporate training manuals explaining how to avoid pay-
ments, portable fridges awarded to adjusters who deny the
most claims, and pizza for parties to shred documents.
2
The Ten Worst Insurance Companies in America
CEO: Thomas Wilson
2007 compensation $10.7 million
(predecessor Edward Liddy made
$18.8 million in compensation and an
additional $25.4 million in retirement
benefits)
HQ:
Northbrook, IL
Profits: $4.6 billion (2007)
Assets: $156.4 billion8
There is no greater poster child for insurance industry
greed than Allstate. According to CEO Thomas Wilson,
Allstate’s mission is clear: “our obligation is to earn a
return for our shareholders.”9 Unfortunately, that dedi-
cation to shareholders has come at a price. According to
investigations and documents Allstate was forced to
make public, the company systematically placed profits
over its own policyholders. The company that publicly
touts its “good hands” approach privately instructs
agents to employ a hardball “boxing gloves” strategy
against its own policyholders.10
Allstate’s confrontational attitude towards its own policy-
holders was the brain child of consulting giant McKinsey
& Co. in the mid-1990s. McKinsey was tasked with devel-
oping a way to boost Allstate’s bottom line.11 McKinsey
recommended Allstate focus on reducing the amount of
money it paid in claims, whether or not they were valid.
When it adopted these recommendations, Allstate made a
deliberate decision to start putting profits over policy-
holders.
The company essentially uses a combination of lowball
offers and hardball litigation. When policyholders file a
claim, they are often offered an unjustifiably low payment
for their injuries, generated by Allstate using secretive
claim-evaluation software called Colossus. Those that
accept the lowballed settlements are treated with “good
hands” but may be left with less money than they need to
cover medical bills and lost wages. Those that do not set-
tle frequently get the “boxing gloves”: an aggressive litiga-
tion strategy that aims to deny the claim at any cost.
Former Allstate employees call it the “three Ds”: deny,
delay, and defend. One particular powerpoint slide
McKinsey prepared for Allstate featured an alligator and
the caption “sit and wait”—emphasizing that delaying
claims will increase the likelihood that the claimant gives
up.12 According to former Allstate agent Shannon Kmatz,
this would make claims “so expensive and so time-
consuming that lawyers would start refusing to help
clients.”13
Former Allstate adjusters say they were rewarded for
keeping claims payments low, even if they had to deceive
their customers. Adjusters who tried to deny fire claims by
blaming arson were rewarded with portable fridges,
according to former Allstate adjuster Jo Ann Katzman.
“We were told to lie by our supervisors. It’s tough to look
at people and know you’re lying.”14
Complaints filed against Allstate are greater than
almost all of its major competitors, according to data col-
lected by the NAIC.15 In Maryland, regulators imposed the
largest fine in state history on Allstate for raising premi-
ums and changing policies without notifying policyhold-
ers. Allstate ultimately paid $18.6 million to Maryland
consumers for the violations.16 In Texas earlier this year,
Allstate agreed to pay more than $70 million after insur-
ance regulators found the company had been overcharg-
ing homeowners throughout the state.17
After Hurricane Katrina, the Louisiana Department of
Insurance received more complaints against Allstate—
1,200—than any other insurance company, and nearly
3
1. Allstate
twice as many as the approximately 700 it received about
State Farm—despite the fact that its rival had a bigger
share of the homeowners market.18
Similarly, in 2003, a series of wildfires devastated
Southern California, destroying over 2,000 homes near
San Diego alone and killing 15 people. State insurance
regulators received over 600 complaints about Allstate and
other companies’ handling of claims.19
Allstate says the changes in claims resolution tactics
were only about efficiency.20 However, the company’s for-
mer CEO, Jerry Choate, admitted in 1997 that the compa-
ny had reduced payments and increased profit, and said,
“the leverage is really on the claims side. If you don’t win
there, I don’t care what you do on the front end. You’re
not going to win.”21
For four years, Allstate refused to give up copies of the
McKinsey documents, even when ordered to do so repeat-
edly by courts and state regulators. In court filings, the
company described its refusal as “respectful civil disobedi-
ence.”22 In Florida, regulators finally lost their patience
after Allstate executives arrived at a hearing without docu-
ments they had been subpoenaed to bring. Only after
Allstate was suspended from writing new business did the
company, in April 2008, finally agree to produce some
150,000 documents relating to its claim review practices.23
Still, some commentators believe many critical documents
were missing.24
Allstate’s “boxing gloves” strategy boosted its bottom
line. The amount Allstate paid out in claims dropped
from 79 percent of its premium income in 1996 to just 58
percent ten years later.25 In auto claims, the payouts
dropped from 63 percent to just 47 percent.26 Allstate saw
$4.6 billion in profits in 2007, more than double the level
of profits it experienced in the 1990s. In fact, the company
is so awash in cash that it began buying back $15 billion
worth of its own stock, despite the fact that the company
was simultaneously threatening to reduce coverage of
homeowners because of risk of weather-related losses.27
Despite its treatment of policyholders, Allstate’s recent
corporate strategy has focused on identifying and retain-
ing loyal customers, those who are more likely to stay with
the company and not shop around. The target demo-
graphic, as former Allstate CEO Edward Liddy said, is
“lifetime value customers who buy more products and
stay with us for a longer period of time. That’s Nirvana
for an insurance company.”28
Loyalty only runs one way, however. While Allstate
focuses on customers who will stick with it for the long
haul, the company is systematically withdrawing from
entire markets. Allstate or its affiliates have stopped writ-
ing home insurance in Delaware, Connecticut, and
California, as well as along the coasts of many states,
including Maryland and Virginia.29
In Louisiana, Allstate has repeatedly tried to dump its
policyholders. In 2007, the company tried to drop 5,000
customers just days after the expiration of an emergency
rule preventing insurance companies from canceling cus-
tomers hit by Katrina. Allstate dropped them for allegedly
not showing intent to repair their properties. After an
investigation by the Louisiana Insurance Department,
Insurance Commissioner Jim Donelon said, “[A]t best, it
was a very ill-conceived and sloppy inspection program.
At worst, they wanted off of those properties.”30 Allstate
also used an apparent loophole in the law by offering its
policyholders a “coverage enhancement” which the com-
pany would later argue was a new policy, and thus exempt
from non-renewal protection.31
In Florida, Allstate has dropped over 400,000 home-
owners since 2004.32 The move has landed Allstate in trou-
ble with regulators because the company appears to be
keeping customers if they also have an auto insurance
policy with Allstate. Florida law prohibits the sale of one
type of insurance to a customer based on their purchase
of another line of coverage.33 Allstate officials have
acknowledged that most of the 95,000 customers non-
renewed in 2005 and 2006 were homeowners-only cus-
tomers. The company ran afoul of regulators in New York
for the same reason, and was forced to discontinue the
practice.34
In California, while other major homeowner insurers,
including State Farm and Farmers, agreed to cut rates,
Allstate demanded double-digit rate increases in what the
former insurance commissioner described as an “exit
strategy.” John Garamendi, now the Lieutenant Governor,
said, “[T]hey’ve said they want to get out of the home-
owners business in a market that is competitive, healthy
and profitable.”35
Consumer advocates have also complained that Allstate
put an ambiguous provision in homeowners’ policies that
may have deceived some policyholders into thinking they
had coverage for wind damage when they did not. So-
called “anti-concurrent-causation” clauses state that wind
4
The Ten Worst Insurance Companies in America
and rain damage—damage covered under the policy—
is excluded if significant flood damage occurs as well.
Therefore, those with policies covering wind and rain dam-
age and “hurricane deductibles” still faced the prospect of
learning, only after a catastrophic loss, that they had no
coverage.36 In 2007, then U.S. Senator Trent Lott sponsored
legislation requiring insurers provide “plain English” sum-
maries of what was and what was not covered in order to
stop this kind of abuse. “They don’t want you to know
what you really have covered,” said Lott.37
5
The Ten Worst Insurance Companies in America
CEO: Thomas Watjen
2007 compensation $7.3 million
HQ:
Chattanooga, TN
Profits: $679 million (2007)
Assets: $52.4 billion38
Unum, one of the nation’s leading disability insurers, has
long had a reputation for unfairly denying and delaying
claims. Unum’s claims-handling abuses have consistently
been the subject of regulator and media investigations.
There is no better example of Unum’s treatment of poli-
cyholders than the case of Debra Potter. Potter, a financial
services worker, developed multiple sclerosis and filed a
disability claim with her insurer Unum. Unum denied the
claim and told Potter her conditions were “self-reported.”
Potter’s physician responded with a series of memos testi-
fying to her problems, saying “there is no basis to support
that her complaints are anything other than legitimate.”
Unum continued to deny the claim for three years, even
after appeals from Potter’s employer, BB&T, and after the
Social Security Administration had concluded she was
totally disabled. Only when Potter hired an attorney did
Unum eventually agree to pay the claim.39
What makes Potter’s case unique is the fact that she
had spent years faithfully selling Unum disability policies
as part of a financial services package. “People need safety
nets, and that’s what I thought I was selling them,” Potter
would later say. “But here I am with all my knowledge of
insurance and I couldn’t make it work for me.”40
Unum has a history of denying and delaying claims. In
2003, then CEO Harold Chandler was forced out after
much controversy over Unum’s claims-handling policies.
Former employees have gone on record saying Unum
ordered them to deny claims in order to meet cost-savings
goals.41 Internal memos would eventually come to light
detailing the company’s plan to move from “a claims-pay-
ment to a claim-management approach.” Company execu-
tives wrote “[the] return on these claim improvement ini-
tiatives is expected to be substantial… [A] 1% decrease in
benefit cost…translates into approximately $6 million in
annual savings.”42
Despite the controversy, Chandler left with $17 million
in severance and pension benefits.
In 2005, Unum agreed to a settlement with insurance
commissioners from 48 states over their claims-handling
practices. Under the agreement, the company agreed to
reopen more than 200,000 cases and pay $15 million.43
In California, where nearly one in every four claims for
long-term care insurance was denied, the California
Department of Insurance launched an investigation into
Unum.44 The investigation concluded in 2005, and found
widespread fraud by the company. According to the report,
Unum systematically violated state insurance regulations
and fraudulently denied or low-balled claims using phony
medical reports, policy misrepresentations, and biased
investigations.45 California Insurance Commissioner John
Garamendi described the insurer as an “outlaw company.”
Yet more recent cases show Unum up to their old
tricks. In 2007, the company admitted it had only
reviewed 10 percent of the cases eligible for reopening
under the terms of legal settlements reached three years
earlier. In one recent case, the company denied the claim
of a 43-year-old man who had to have a quintuple bypass
and several stents put in to expand his arteries. Despite
doctors’ orders to stop working, Unum told him he was
not disabled and could still work—a decision the U.S. 9th
Circuit Court of Appeals would later describe as defying
medical science.46
6
2. Unum
Unum’s activities, and those of other notorious insur-
ers such as Conseco, arose the suspicions of Senator
Charles Grassley (R-Iowa), who asked the Government
Accountability Office (GAO) to investigate, and also wrote
to Unum CEO Thomas Watjen demanding answers
regarding the company’s policies and practices.47
7
The Ten Worst Insurance Companies in America
CEO: Robert Willumstad (former CEO Martin
J. Sullivan was fired in June 2008, and
is expected to receive as much as $68
million, despite leading AIG to record
losses over his three-year tenure—2007
compensation $14.3 million)
HQ:
New York, NY
Profits: $6.2 billion (2007)
Assets: $1.06 trillion48
The world’s biggest insurer, AIG has a long history of
claims-handling abuses for both individuals and busi-
ness clients. AIG executives have also come under fire
for opportunisticly seeking price increases during
catastrophes. Now the company has been labeled “the
new Enron” because of charges of multi-billion dollar
corporate fraud.
AIG has long had a reputation for claims-handling abus-
es.49 Part of the reason for that reputation is AIG’s reliance
on underwriting results. Nearly every other insurance
company relies on the income it makes from investing its
policyholders’ premiums. AIG has always focused on
turning a profit on underwriting—in other words, taking
in more money in premiums than it pays out in claims.
To do that, the company has had to be extremely parsi-
monious about the claims it pays. Former AIG claims
supervisors have alleged in litigation that the company
used all manner of tricks to deny or delay claims, includ-
ing locking checks in a safe until claimants complained,
delaying payment of attorney fees until they were a year
old, disposing of important correspondence during rou-
tine “pizza parties,” and routinely fighting claimants for
years in court over mundane claims.50
In 1999, after discovering AIG was losing as much as
$210 million on auto-warranty claims, CEO Greenberg
installed a new team that began to systematically reject
thousands of claims, even when its own claims-handling
contractor recommended they be paid. Richard John, Jr., a
vice-president at the contractor, would testified that the
company used any excuse to deny a claim, including rul-
ing that installing manufacturer-approved tires was a
“modification” that invalidated the warranty.51
After an AIG-insured Safeway burned down in
Richmond, Virginia, the supermarket was confronted with
damage claims from nearby residents who had been
affected by the fire. AIG denied the claims saying that the
damage was caused not by fire but by smoke, which quali-
fied as a form of air pollution and as such was not cov-
ered. In fact, in a series of high profile cases, AIG or its
subsidiaries fought claims on tenuous bases, building its
reputation as one of the most aggressive claims fighters in
the industry.52
In 2005, AIG was sanctioned by a federal judge in
Indianapolis for attempting to unfairly block discovery in
an environmental case. AIG’s lawyers went so far as to give
instructions not to answer 539 times during one deposition
of an AIG executive.53 In January 2008, AIG agreed to pay
$12.5 million to several states after state insurance commis-
sioners found that the company had conspired with other
insurance brokers to submit fake bids in order to create an
illusion of a competitive bidding process in commercial
insurance markets. Businesses and local governments
ended up paying artificially inflated insurance rates.54 Even
other insurance companies got the treatment. In 2007, an
AIG reinsurance unit was forced by an arbitrator to pay
more than $440 million to five insurance companies who
alleged the AIG unit tried to rescind their contract when
it was time to pay, and then continued to refuse payment
even after several courts had ruled against rescission.55
8
3. AIG
AIG is not alone in using strategies such as deny-delay-
defend to enhance its bottom line at their customers’
expense. What sets AIG apart, however, is the way it has so
callously sought to take advantage of its policyholders’
misfortunes.
In 1992, on the day Hurricane Andrew landed in
Florida, AIG Executive Vice-President J.W. Greenberg, son
of then-CEO Maurice Greenberg, sent a company-wide
memo saying, “We have opportunities from this and
everyone must probe with brokers and clients. Begin by
calling your underwriters together and explaining the sig-
nificance of the hurricane. This is an opportunity to get
price increases now. We must be the first and it begins by
establishing the psychology with our own people. Please
get it moving today.”56
Similarly, the September 11th terrorist attacks were to
most people a terrible tragedy. To Maurice Greenberg, the
“opportunities for his 82-year-old company have never
been greater.”57 In the immediate aftermath of the attacks,
prices for insurance soared by what Greenberg described
as “leaps and bounds.” “It’s a global opportunity,” the CEO
said at the time. “It’s not just in the United States, but
rates are rising throughout the world. So our business
looks quite good going forward.”58 Greenberg also said of
the increased awareness of the need for insurance that the
attacks prompted, “AIG is well positioned—probably as
well as it's ever been in this marketplace.”59
AIG executives are unapologetic about their reputation
for opportunism. “We’ve always been opportunistic.
When we see opportunities, we will never change. At AIG
it’s part of our culture.”60
AIG’s opportunism has also crossed the line into fraud.
According to the Federal Bureau of Investigation (FBI),
insurance fraud totals more than $40 billion and costs the
average family as much as $700 per year. However, while
the insurance industry only talks about fraud committed
by its policyholders, what interests the FBI is the increase
in corporate fraud by the insurance companies them-
selves, leading the agency to establish it as one of its top
investigative priorities.61 No company is a better example
of this kind of fraud than AIG.
In 2006, AIG paid $1.6 billion to settle charges of a
variety of financial shenanigans that had commentators
describing AIG as “the new Enron.”62 Two years later, five
insurance executives were found guilty of fraud.63
The fraud accusations were traced back to longtime
CEO Maurice Greenberg, who was ousted from the com-
pany he had led for 38 years.64 Greenberg was identified by
prosecutors as an “unindicted co-conspirator,” and noti-
fied that the Securities and Exchange Commission, which
had already fined the company $126 million, was likely to
pursue civil charges against him for two separate inci-
dences of fraud.65 AIG was also fined millions of dollars
by state insurance regulators, and faces charges that they
bilked pension funds out of billions of dollars.66
But that was not the end of the AIG fraud saga.
Greenberg, who once described civil justice attorneys as
“terrorists,” launched an epic battle of lawsuits and coun-
tersuits with his former company.67 Suddenly, the $1.6 bil-
lion AIG paid to settle claims of fraud seemed to pale in
comparison to the charges being exchanged between those
who knew better than anyone the true extent of the fraud.
AIG now claims Greenberg “misappropriated” $20 billion,
and Greenberg in turn says AIG concealed $4 billion in
losses.68
In 2006, AIG was implicated in the manipulation of
local government bond issues. At least $7 billion worth of
“phantom bonds,” which were intended to aid the poor
and supply computers to inner city schools, have instead
only benefited companies such as AIG. In one such “phan-
tom bonds” case in Florida, an AIG unit conspired with
other financial services firms to extract fees from a $220
million bond issue that was intended to promote afford-
able housing for low income families. Unbeknownst to the
local government agency involved, AIG’s deal meant the
less money that actually went to affordable housing, the
more money AIG and its fellow companies would make.
AIG and its co-conspirators eventually took $12 million in
fees. Not a penny went to the affordable housing. The deal
also violated U.S. tax laws, which would eventually force
AIG to settle with the IRS. AIG was involved in similar
deals in Georgia, Oklahoma, and Tennessee.69
9
The Ten Worst Insurance Companies in America
CEO: Edward B. Rust Jr.
2007 compensation $11.7 million
HQ:
Bloomington, IL
Profits: $5.5 billion (2007)
Assets: $181.4 billion70
As the biggest property casualty insurance company in
America, State Farm has become notorious for its deny
and delay tactics. In many cases, the company has gone
to extreme lengths to avoid paying claims, including
forging signatures on earthquake waivers after the dead-
ly Northridge earthquake, and altering engineering
reports regarding damage after Hurricane Katrina.
Hurricane Katrina showed State Farm at its worst. One of
the deadliest natural disasters in U.S. history, Hurricane
Katrina made landfall on August 29, 2005, near Buras,
Louisiana. The storm killed nearly 1,600 people and
caused $135 billion in damages.71
One of the legacies of the storm was the widespread
dissatisfaction with the response of State Farm and other
insurance companies. State Farm would later claim it had
settled 99 percent of its cases, but regulators criticized the
company for using misleading statistics.72 The company
claimed that any house that had what they considered
water damage did not constitute a claim in the first
place.73 In fact, the Louisiana Department of Insurance
reported that it was contacted by 9,000 consumers seeking
help resolving disputes with their insurance companies.74
State Farm denied the claims of the Nguyen family of
Mississippi, who lost their home in Hurricane Katrina.
State Farm’s own engineers concluded that the damage
was caused by wind and even cited eyewitnesses who saw
another house picked up by the wind and thrown into the
Nguyens’ home. State Farm, however, hired another engi-
neering firm to come to a different conclusion and then
denied the claim, saying the damage was caused by flood-
ing.75 State Farm also denied the claims of Dean Barras in
Louisiana. Barras’s home was exposed to the elements for
two weeks, but State Farm’s response was “the chimney
was not built properly.”76
Bob Kochran, CEO of an engineering firm assessing
Katrina damage for State Farm, said that he was asked to
alter reports with which the company did not agree. In
order to keep the State Farm contract, Kochran agreed to
tell his engineers to “re-evaluate each of our assignments.”
One of the engineers, Randy Down, responded in an
email, “I have a serious concern about the ethics of this
whole matter. I really question the ethics of someone who
wants to fire us simply because our conclusions don’t
match theirs.” State Farm’s attempt to unduly influence
the engineers was exposed during litigation in Jackson,
Mississippi.77
One such angry policyholder was United States Senator
Trent Lott. Lott, who had long counted on insurance
companies for support, became an industry critic after his
beachfront house was destroyed by Hurricane Katrina and
his subsequent claim was denied by State Farm. Lott even-
tually settled with State Farm, but went on to sponsor leg-
islation requiring insurers to provide “plain English” sum-
maries of what their policies did and did not cover.
Hurricane Katrina had highlighted insurance company
use of such things as anti-concurrent clauses, which led
policyholders into believing they were covered from the
risks of hurricanes, when in fact subsequent flooding
might wipe out any chance of a claim being paid. “They
don’t want you to know what you really have covered,”
said Lott.78
In April 2007, State Farm agreed to re-evaluate more
than 3,000 Hurricane Katrina claims, and within a few
10
4. State Farm
months had paid nearly $30 million in additional settle-
ments.79 When a grand jury later issued subpoenas prob-
ing new claims against State Farm, the company sued
Mississippi Attorney General Jim Hood. Hood decried the
lawsuit, saying the company’s agreement to reopen claims
had never been intended as “blanket immunity” from
future probes.80
Like Allstate, State Farm used consulting giant
McKinsey & Co. The McKinsey concept involves cutting
spending on claims payments to boost profits. Agents
steeped in the McKinsey way speak of the “three D’s”—
deny the claim, delay the payment, and then do anything
to defend against a lawsuit.
In 1994, the Northridge earthquake in California killed
57 people, injured 9,000, and caused an estimated $33.8
billion in damage. It was the costliest earthquake in U.S.
history, and insurance companies such as State Farm did
everything they could to avoid having to pay for it. After it
hit, a State Farm employee testified that company officials
forged signatures on earthquake waivers to avoid paying
quake-related claims and then withheld evidence when
the company was sued. State Farm and other insurers
accused of mishandling Northridge claims were fined over
$3 billion in penalties; however, State Farm never actually
paid the fines. Instead, an insurance department whistle-
blower would eventually reveal that the insurers donated
$12 million to two non-profit foundations created by
insurance commissioner Chuck Quackenbush in what
amounted to little more than a bribe.81
In 1999, a series of powerful tornadoes killed 44 people
in Oklahoma and caused $1.8 billion in damages.
Homeowners brought a class-action suit against State
Farm, alleging the company had tried to undervalue dam-
age to homes or claim damage was caused by other factors
such as faulty construction. A jury eventually ruled that
State Farm acted “recklessly” and “with malice” and disre-
garded its duty to policyholders. The firm that State Farm
used to allegedly undervalue damage was Haag
Engineering—the same firm that would be accused of
mishandling Katrina claims six years later.82
In 1999, despite Oklahoma tornado claims, State Farm
earned $1.03 billion in profits after taxes.83 In 2005,
despite Hurricane Katrina, State Farm turned a $3.24 bil-
lion profit. The following year, without a major catastro-
phe, profits increased to $5.32 billion, for which CEO Ed
Rust received an 82 percent pay raise.84 In fact, since State
Farm hired McKinsey, the company has seen profits more
than double from its 1990s level to the $5.4 billion it
made in 2007.
Following the same tactic as Allstate, State Farm has
embarked upon a campaign of market withdrawals and
non-renewals in the aftermath of Katrina. State Farm has
stopped writing new homeowners policies in Mississippi
and Florida, and in the latter state non-renewed a further
75,000 policyholders.85 Just as they did in the aftermath of
Katrina, State Farm stopped writing new homeowner
policies.86
While State Farm will do anything to fight a claim once
it has been taken to court, the company has never been
shy about using the courts to its own advantage, even
when it has to first stack the deck. In the 2004 Illinois
Supreme Court election, one justice—Lloyd Karmeier—
received huge amounts from State Farm employees,
lawyers, and groups to which the insurer belonged.
Karmeier won the election and soon after cast a crucial
vote reversing a $9 billion judgment against State Farm.87
11
The Ten Worst Insurance Companies in America
CEO: C. James Prieur
2007 compensation $2.6 million
HQ:
Indianapolis, IN
Profits: $179.9 million (2007)
Assets: $33.5 billion88
Conseco sells long-term care policies, typically to the
elderly. Unfortunately, Conseco uses the deteriorating
health of its policyholders to its advantage because the
company knows if it waits long enough to pay out
claims, its customers will die.
Conseco’s customers are some of the most vulnerable
members of the population. The company sells long-term
care policies, typically to the elderly, as insurance that the
policyholder will be taken care of at the end of his or her
life. Unfortunately, Conseco uses the imminent deaths of
its policyholders to its advantage by delaying or denying
valid claims of those who can no longer care or advocate
for themselves. Mary Beth Senkewicz, a former senior
executive at the National Association of Insurance
Commissioners (NAIC), summed up the tactics of the
long-term care insurance industry quite succinctly: “The
bottom line is that insurance companies make money
when they don’t pay claims…They’ll do anything to avoid
paying, because if they wait long enough, they know the
policyholders will die.”89
Long-term care insurance policies are usually pur-
chased by senior citizens as assurance that they will be
able to afford to live in an assisted living center or nursing
home when they are no longer capable of living on their
own. Conseco and its subsidiaries, Bankers Life and
Casualty and Penn Treaty American, sell such policies.
However, many policyholders have not been satisfied with
the way their claims have been handled. Conseco,
Bankers, and Penn Life have had numerous complaints
filed with state regulators over long-term care insurance,
particularly in regard to claims handling, price increases,
and advertising methods.90
Despite all their efforts to retain money by refusing to
pay valid claims, Conseco has fallen on hard times finan-
cially. Throughout the 1990s, Conseco and its affiliates
aggressively undercut their competitors and expanded
their market share in the long-term care insurance mar-
ket.91 Around the time company founder Stephen Hilbert
left in 2000, the market tightened and executives realized
they had been underestimating how long policyholders
would live once they entered nursing homes. In 2002, the
company fell $6.5 billion in debt and was forced into
Chapter 11 bankruptcy.92 Conseco sued Hilbert for more
than $250 million over company-backed loans and debt.
In 2004, a court ordered Hilbert to return $62.7 million
plus interest to Conseco and allowed the company to fore-
close upon his 25,000 square-foot mansion in Indiana.93
Hilbert and Conseco agreed to a confidential settlement
in 2007 that allowed the former CEO to keep his house.94
Two other Conseco executives faced civil and criminal
charges for their roles in an accounting fraud scheme that
overstated the company’s earnings by hundreds of mil-
lions of dollars. Former CFO Rollins S. Dick and former
chief accounting officer James S. Adams admitted to filing
misleading financial statements with regulators between
March 1999 and April 2000. In 2006, an Indiana court
ordered that Dick and Adams be prohibited from serving
as a director or officer of a public company for five years
and ordered them to pay civil penalties of $110,000 and
$90,000, respectively.95
Former employees of Conseco and its subsidiaries have
spoken out about the company’s claims-handling prac-
tices. Former Bankers Life agent Betty Hobel said Conseco
12
5. Conseco
and Bankers Life “made it so hard to make a claim that
people either died or gave up.”96 Another former Bankers
Life employee, Robert Ragle said “[t]heir mentality is to
keep every dollar they can.”97 In a 2006 deposition,
Bankers Life claims adjuster Teresa Carbonel described
how she was forbidden from calling physicians or nursing
homes to request missing paperwork before denying
claims. Another Conseco employee, Jose Torres, testified
in a separate deposition that he was told to withhold pay-
ment on claims until the policyholder submitted docu-
ments not even required under the terms of the policy.98
In May 2008, NAIC announced it had brokered a set-
tlement between Conseco and 39 states and the District
of Columbia over a pattern of abuses in its long-term care
business. As part of the agreement with state insurance
commissioners, Conseco and its subsidiaries were fined
$2.3 million and ordered to pay $4 million in restitution
to policyholders. The company also agreed to invest $26
million in its claims processing system. If it fails to
improve its service, Conseco will be ordered to pay an
additional $10 million in fines. In addition to meeting
these monetary obligations, Conseco must review its han-
dling of past claims and set up systems to insure that
future claims are treated fairly and handled in a timely
manner. The company must review and readjust 1,112
denied claims, notify an additional 18,000 policyholders
regarding 49,000 claims that were partially denied or
denied after an initial payment was made, revise its claim-
handling procedures, and set up a toll-free call center for
consumers who believe their claims were not handled in
good faith.99
13
The Ten Worst Insurance Companies in America
CEO: Angela F Braly
2007 compensation $9.1 million
HQ:
Indianapolis, IN
Profits: $3.2 billion (2007)
Assets: $51.6 billion100
WellPoint has a long history of putting its bottom line
ahead of the welfare of its policyholders and their health
care providers. Investigations have shown that
Wellpoint routinely cancels the policies of pregnant
women and chronically ill patients.
Indianapolis-based Anthem and Thousand Oaks, and
California-based WellPoint completed a $20.8 billion
merger in late 2004, creating the nation’s largest health
insurer, covering approximately 28 million people.101 The
deal was widely criticized by consumers, doctors, pension
managers, and state regulators, who feared the merger
would create a monopoly that would both raise premiums
and reduce payment on claims, in part to cover the cost of
the massive severance packages offered to executives who
brokered the deal.
California’s State Treasurer Philip Angelides and
Insurance Commissioner John Garamendi, as well as offi-
cials at the California Public Employees’ Retirement
System, or CalPERS, criticized the deal for providing
excessive compensation to executives. The terms of the
merger included a payout of over $250 million to nearly a
dozen executives at the company. Leonard Schaffer,
WellPoint’s Chairman and CEO at the time, received the
largest windfall of all: nearly $82 million in severance, an
executive pension, and stock options.102
California is making an aggressive effort to force
WellPoint to stop engaging in practices it believes are ille-
gal. In March 2007, the state’s Department of Managed
Health Care fined Blue Cross of California and its parent
company, WellPoint, $1 million after an investigation
revealed that the insurer routinely canceled individual
health policies of pregnant women and chronically ill
patients. The practice, known as rescission, is illegal in
California. In order to drop individual policies, which are
usually purchased by consumers who cannot receive
health insurance through their employers, the insurer
must show that the policyholder lied about their medical
history or preexisting conditions on the application. As
part of the state’s investigation, regulators randomly
selected 90 cases where the insurer had dropped the poli-
cyholder. In every single one investigators found the
insurer had violated state law.103
During the investigation, California regulators uncov-
ered more than 1,200 violations of the law by the company
in regard to unfair rescission and claims processing prac-
tices. In December 2007, Insurance Commissioner Steve
Poizner announced his office was imposing a $12.6 million
fine against Blue Shield, saying the company had “commit-
ted serious violations that completely undermine the pub-
lic trust in our healthcare delivery system.”104 Among these
violations were improper rescissions, failure to pay claims
on a timely basis, failure to provide required information
when denying a claim, failure to pay interest on claims
where required, and mishandling of member appeals.105
Despite a series of fines and reprimands from the
state, Anthem did not change its claims-handling prac-
tices. The continuation of rescission practices forced Los
Angeles City Attorney Rocky Delgadillo to sue Anthem
Blue Cross of California in April 2008, for fraud, viola-
tion of state and federal insurance regulations, and viola-
tion of truth-in-advertising laws. Anthem’s practice of
canceling policies of sick patients prompted Delgadillo to
claim that “[t]he company has engaged in an egregious
14
6. WellPoint
scheme to not only delay or deny the payment of thou-
sands of legitimate medical claims but also to jeopardize
the health of more than 6,000 customers by retroactively
canceling their health insurance when they needed it
most.”106 He also alleged that “more than 500,000 con-
sumers have been tricked into purchasing largely illusory
healthcare coverage based upon the company’s false
promise.”107 The city is seeking civil penalties of between
$2,500 and $5,000 for each violation, which could add up
to over $1 billion.
Other states have taken action against WellPoint and its
subsidiaries over their claims-processing practices. In
January 2008, Nevada Insurance Commissioner Alice A.
Molasky-Arman announced a $1 million settlement with
Anthem Blue Cross and Blue Shield over systematic over-
charging of policyholders.108 Similarly, Colorado’s
Insurance Commissioner, Marcy Morrison, secured a $5.7
million refund for consumers of Anthem Blue Cross Blue
Shield health insurance policies.109 In Kentucky, the Office
of Insurance ordered Anthem Health Plans of Kentucky
to refund $23.7 million to 81,000 seniors and disabled
people over inaccurate Medicare claims payments.110
Physicians have their own set of grievances against the
insurance behemoth. WellPoint was one of several health
insurers sued by 800,000 doctors who claimed they were
routinely denied full payment for care they provided to
policyholders. In two lawsuits, the physicians argued that
insurance companies manipulated computer programs to
systematically underpay physicians for the treatments they
provided.111
Physicians in California have encountered a new rea-
son to be outraged by WellPoint. Blue Cross California
has recently sent letters to physicians instructing them to
inform the company of any pre-existing conditions they
come across when evaluating patients. The letter
demanded that “[a]ny condition not listed on the appli-
cation that is discovered to be pre-existing should be
reported to Blue Cross immediately.”112 The California
Medical Association promptly forwarded the letter to
state regulators complaining that the insurance company
is “asking doctors to violate the sacred trust of patients to
rat them out for medical information that patients would
expect their doctors to handle with the utmost secrecy
and confidentiality.”113
15
The Ten Worst Insurance Companies in America
CEO: Paul N. Hopkins (Farmers Group Inc.
US subsidiary of Zurich Financial
Services. Zurich CEO James J. Schiro
2007 compensation $10.3 million)
HQ:
Los Angeles, CA
Profits: Zurich Financial—$5.6 billion (2007)
Assets: $387.7 billion114
Swiss-owned Farmers Insurance Group consistently
ranks at or near the bottom of homeowner satisfaction
surveys. Given its tactics towards its policyholders, that
comes as no surprise. The company even created an
incentive program that offered pizza parties to adjusters
who met low payment goals.
Farmers Insurance Group consistently ranks among the
worst insurance companies for customers of homeowners
or auto insurance in satisfaction surveys from the likes of
JD Powers and Consumer Reports.115 Nor is it just individ-
uals who get the short end of the stick. U.S. businesses
were victimized by Farmers’ parent company, Swiss giant
Zurich Financial Services, which in the last few years has
paid out nearly half a billion dollars to settle bid-rigging
and price-fixing cases. According to regulators, “business-
es shopping for commercial insurance were deceived into
believing they were getting the best deals available. The
whole anti-competitive scheme was an intentional smoke
screen by several insurance players to artificially inflate
premiums and pay improper commissions to those who
brokered the deal.”116
No case is as illustrative of the Farmers attitude than
that of Ethel Adams. The 60-year-old Washington State
woman was involved in a multi-vehicle accident that put
her in a coma for nine days, left her with devastating
injuries, and eventually confined her to a wheelchair.
Incredibly, Farmers denied her claim, reasoning that the
driver at fault had acted in a moment of intentional road
rage, and thus the crash was not an accident. The compa-
ny’s denial caused an outcry, and Farmers Los Angeles
headquarters was flooded with calls and emails from
angry policyholders threatening to boycott the company.
Farmers only caved when the Washington State Insurance
Commissioner threatened the company with legal
action.117
Adams’ case is symptomatic of Farmers’ attitude
towards its policyholders. Internal company documents
and testimony from former employees reveal a company
that systematically places profits over policyholders. An
example is Farmers’ employee incentive program, “Quest
for Gold.”118 The program offers token incentives, includ-
ing $25 gift certificates and pizza parties, to adjusters who
meet goals, such as low payments and the rates at which
they are able to dissuade claimants from retaining an
attorney.119 Employees’ performance reviews and pay raises
are also determined by their ability to meet claim payment
goals.120 Internal emails show one particular claims manag-
er encouraging representatives to intentionally underpay
valid claims, saying, “[a]s you know, we have been creeping
up in settlements… Our [claims representatives] must
resist the temptation of paying more just to move this type
file. Teach them to say, ‘Sorry, no more,’ with a toothy grin
and mean it.”121 The same email also indicated that claims
representatives were financially rewarded for such behav-
ior. The manager singled out an employee who consistent-
ly low-balled claims, saying, “[i]f he keeps this up during
2002, we will pay him accordingly.”122
Such strategies have attracted the attention of state
insurance industry regulators. In North Dakota, Farmers
has been fined for “unfair practice in the business of
insurance… and an unfair claim settlement practice,” for
16
7. Farmers
its use of employee incentive programs and for tying per-
formance evaluations to arbitrary claims-handling
goals.123 In Oklahoma, Farmers agreed to limit its use of
the claims-evaluation software Colossus, the same soft-
ware used by Allstate, after the company was found to
have repeatedly failed to pay claims in full.124 The Texas
Department of Insurance joined with the state’s attorney
general in 2002 to file a lawsuit against Farmers over
violations of state consumer protection laws, including
deceptive, misleading, and unfairly discriminatory home-
owners’ insurance practices.125 While the company would
not admit wrongdoing, it did agree to reduce rates and
issue refunds.126 However, Texas regulators were forced to
take action against Farmers again just two years later,
ordering the company “to cease and desist from charging
excessive property rates for residential property insurance
in violation of Texas law.”127
Farmers’ most high-profile run-in with state regulators
occurred in California after the 1994 Northridge earth-
quake, which killed 72 people, injured nearly 12,000, and
caused over $12 billion in damages.128 Many of the home-
owners were covered by Farmers. Despite paying out over
$1.9 billion for 37,000 claims, the company was hit with a
wave of bad faith lawsuits for failing to pay policyholders
the full value of their homes.129 In one case, a Farmers’
subsidiary was sued for bad faith and fraud by a condo-
minium homeowners association after the company
refused to pay to rebuild the severely damaged building.
The homeowners, who were mostly minorities, were
helped in their case by the testimony of a former claims
adjuster, Kermith Sonnier, who admitted that a supervisor
told him to settle the claim for a target amount, despite
never having seen the damage firsthand. In March 2000,
over six years after the quake struck, a jury awarded the
homeowners association $3.98 million in compensatory
damages and was deliberating punitive damages when
Farmers agreed to settle the case for $20 million. Sonnier,
who had been fired by Farmers, also successfully sued the
company for compensatory and punitive damages.130
The reaction of California regulators was an example
of the sometimes dubious relationship between the indus-
try and those who are supposed to oversee it. California
Insurance Commissioner Chuck Quackenbush issued a
proposed order saying that the company mishandled
claims and could potentially face $450 million in fines.
However, instead of pursuing the investigation,
Quackenbush offered Farmers a deal that would absolve
the company of all liability if it donated $1 million to the
California Insurance Education Project, a foundation cre-
ated by Quackenbush. The company also contributed
$10,000 to one of the commissioner’s political accounts.131
In addition, Quackenbush’s settlement required that
Farmers survey all its policyholders to gauge satisfaction
with the company’s handling of their claims.132 Incredibly,
any policyholder who completed the Farmers survey
automatically waived all rights to seek justice in court.133
Quackenbush resigned under the threat of impeachment
two months after the settlement was made public.134
Immediately following the earthquake, the company
implemented a program asking employees to help recoup
some of the losses and adopted the slogan “Bring Back a
Billion,” meaning that employees were expected to bring in
a billion dollars for the surplus.135 Some of these employees
even signed pledges agreeing to work toward this goal.
More recently, Farmers have found California regula-
tors less easy to manipulate. In 2007, California Insurance
Commissioner Steve Poizner found that some Farmers
customers who filed claims later had their insurance non-
renewed or experienced premium hikes just because they
used their insurance for its intended purpose. Farmers
agreed to refund policyholders $1.4 million and paid $2
million in administrative fines, although it did not admit
any wrongdoing.136
17
The Ten Worst Insurance Companies in America
CEO: Stephen J Hemsley
2007 compensation $13.2 million
HQ:
Minnetonka, MN
Profits: $4.7 billion (2007)
Assets: $53.5 billion137
UnitedHealth is plagued by accusations that its greed
has endangered patients. Physicians report that reim-
bursement rates are so low and delayed by the company
that patient health is compromised. Money that should
have been spent on medical treatment for policyholders
has instead gone to the company’s former CEO, who
faced criminal and civil charges for backdating stock
options. UnitedHealth has also used its association with
AARP to jack up premiums on products aimed at sen-
iors, even though they are no better than their cheaper
counterparts.
William McGuire orchestrated UnitedHealth Group’s
rapid growth to become the largest health insurance com-
pany by premiums written in America.138 Along the way,
he ensured that he would be well compensated for his
efforts. When McGuire became CEO in 1990, he immedi-
ately began to streamline the company by cutting back on
coverage for treatment he deemed unnecessary and by
bargaining with doctors to reduce payments.
UnitedHealth also became dominant in the burgeoning
HMO market by investing in information technology and
acquiring smaller companies.139 The company’s success
under his leadership made it easy for McGuire to con-
vince the board of directors to reward him for his per-
formance. McGuire was allowed to choose when his stock
options would be awarded, essentially allowing him to
backdate his options to make it appear they were issued
on days when stock prices were at their lowest.140
The Wall Street Journal conducted an analysis of
McGuire’s stock option grants between 1994 and 2002
and concluded that the probability the options were ran-
domly awarded on dates when stock prices were at their
lowest would be about 1 in 200 million.141 An internal
memo made public during litigation confirmed that on
at least one occasion options were granted “with an
advantageous price.”142 By backdating his options,
McGuire was able amass $1.6 billion in options as
UnitedHealth’s stock price rose from 30 cents per share
in 1990 to $62.14 in December 2005.143 Given the incredi-
ble performance of the stock, the board saw no reason to
restrain McGuire.
Shareholders and the SEC did not share the board’s
view of McGuire’s worth. The SEC opened an investiga-
tion into UnitedHealth’s options granting process, which
ultimately led to McGuire’s ouster as CEO in 2006.
Additionally, McGuire agreed to give back $620 million in
stock gains and retirement compensation in order to set-
tle federal and shareholder claims.144 The settlement left
McGuire with just $800 million in options and $530 mil-
lion in compensation.145
During his tenure as CEO, McGuire was meticulous
about expanding the company’s reach. One very profitable
move was the decision to partner with AARP to sell insur-
ance products. UnitedHealth Group understood the value
of AARP’s image as a trusted advocate for senior citizens’
rights when it partnered with the non-profit organization
in 1998 to market its insurance products. That year, the
insurer won a 10-year contract to brand its supplemental
Medicare insurance policies with the AARP name.146 The
deal was lucrative for both sides. UnitedHealth received
$4.5 billion in premiums from AARP-branded products in
2004, while the seniors’ organization pulled in $197 mil-
lion in royalties and $23 million in investment income
that same year.147
18
8. UnitedHealth
Beginning in 2006, AARP licensed its name to three
UnitedHealth Medicare prescription drug plans, covering
4.1 million people.148 UnitedHealth also sells two other
prescription drug plans not branded by AARP, and the
enrollment numbers show just how effective the AARP
name is. UnitedHealth’s stand-alone plans cover only
600,000 people.149
While this partnership is advantageous for
UnitedHealth, it laid AARP vulnerable to the charge of
allowing financial gain to trump its members’ best inter-
ests. The premiums charged by UnitedHealth’s AARP
plans are often far higher than those charged by other
companies. The AARP reputation gives seniors the false
sense of value and quality, even though there is little dif-
ference in services and the premiums are far higher.
In June 2007, UnitedHealth was forced to suspend
marketing of its Medicare Advantage program after the
federal government determined that the company was
misrepresenting its products. Medicare audit reports
found that UnitedHealth lacked an effective program to
supervise its marketing representatives.150 The reports also
found that the company failed to notify policyholders
about changes in costs and benefits.
UnitedHealth has repeatedly been accused of focusing
on profits at the expense of its policyholders and their
health care providers. The Nebraska Insurance
Department reported a spike in complaints against the
insurance giant for wrongful denials of claims and for
failing to reimburse claims in a timely manner. Other
state regulators have said UnitedHealth has acted improp-
erly in denying claims. In one case, the company denied a
doctor’s request for an enclosed bed to protect a four-
year-old with an abnormally small head. In another case,
the company rejected a request from a patient who lost
200 pounds after bariatric surgery and wanted to have
flaps of excess skin removed to prevent infection.151
Physicians report that UnitedHealth’s reimbursement
rates are so low and delayed that patient health is being
compromised. Many physicians in South Carolina have
stopped accepting UnitedHealth coverage and others are
forcing patients to pay up front. South Carolina is the
only state that does not have a “prompt pay law,” which
requires insurers to pay claims within 90 days. Texas,
which has a prompt pay law, has levied $4 million in fines
against UnitedHealth for late payment.152 Regulators in
Arizona fined the insurer $364,750 for illegally denying
over 63,000 claims by doctors.153
New York regulators and health care providers have
taken an aggressive stance against UnitedHealth practices
they believe to be unfair. The state Department of Health
prohibited UnitedHealthcare of New York from enrolling
new members until it improved practices, such as adding
more customer relations staff, responding to claims faster,
and updating financial reports.154 The American Medical
Association (AMA) and the Medical Society of the State of
New York sued the insurer over its reimbursement rates.155
Perhaps the biggest hit to UnitedHealth will come from
a lawsuit New York Attorney General Andrew Cuomo
intends to file over how the company determines what
portion of a doctor or hospital bill to pay. Cuomo alleges
that UnitedHealth has systematically been forcing patients
to pay more than they should for visits to out-of-network
doctors and hospitals by intentionally low-balling reim-
bursement rates. A company called Ingenix calculates
rates; however, this company is owned by UnitedHealth,
which creates the potential for a conflict of interest.156
19
The Ten Worst Insurance Companies in America
CEO: Mark S. McAndrew
2007 compensation $4.7 million
HQ:
McKinney, Texas
Profits: $527.5 million (2007)
Assets: $15.2 billion157
Founded, by its own admission, as little more than a
scam, Torchmark has preyed upon low-income
Southerners for over 100 years. Torchmark is the hold-
ing company for a variety of subsidiaries offering low
cost burial insurance, cancer insurance, life insurance,
and similar policies. The company has come under fire
for a variety of transgressions, including charging
minority policyholders more than whites.
According to its former CEO, Torchmark’s very origins are
as a scam. Founded in 1900, the group’s purpose was to
funnel money to its founders, according to former CEO
Frank Samford. Then known as the Heralds of Liberty, it
initially registered itself as a fraternal organization to cir-
cumvent Alabama’s insurance laws. It was reorganized as a
stock company in 1929 and absorbed several other insur-
ance companies over the course of the century before
adopting the name Torchmark for the holding company
in 1982.158
Since then, Torchmark and its various subsidiaries have
preyed upon low-income Americans all over the South.
The various schemes and tactics it has engaged in, includ-
ing race-based underwriting, refusing insurance to non-
English speakers, and deliberate overcharging of premi-
ums, have prompted frequent lawsuits from regulators
and policyholders alike. Now Torchmark plans to expand
into more states.159
In the 1990s, Torchmark subsidiary Liberty National
Insurance was forced to pay several millions of dollars in
litigation alleging fraud in selling cancer insurance poli-
cies. The company had marketed the policies in the 1980s
promising lifetime benefits, yet changed the policies with-
out telling their customers.160
Torchmark subsidiaries Globe Life and Accident
Insurance and United American Insurance also came
under fire for their marketing of individual health insur-
ance policies. Some of the tactics that were highlighted
included selling replacement policies that did not actually
replace all of a person’s coverage. Company agents would
convince policyholders that their current coverage would
be discontinued at age 65, even when it was guaranteed
for life, and then would offer new policies that were not
worth as much. Another tactic involved offering “low-
cost” policies at rates that quickly shot up. In one such
case in 1989, a Greenville, Mississippi, man bought a poli-
cy with an $86 a month “teaser rate.” Torchmark did not
disclose that the rate would immediately go up. Within
two years, the rate had more than doubled.161
For years Torchmark and its affiliates have been
involved in litigation concerning race-based pricing, par-
ticularly over “burial policies.” In the mid-1980s, half of
all Alabamans who died had a burial policy from
Torchmark. These burial policies were sold at a higher
price to black policyholders. In 2000, a Florida court
ordered the company to stop collecting premiums on the
old burial policies because black policyholders had been
charged more than white policyholders. Alabama regula-
tors followed with an investigation.162 In 2006, Torchmark
subsidiary Liberty National Life Insurance paid $6 mil-
lion to resolve a 2,000 member class action lawsuit.
According to the allegations, Liberty National agents
would market these policies with premiums of less than
$1 to attract low-income policyholders. However, black
policyholders ended up paying 36 percent more than
white policyholders.163
20
9. Torchmark
In 2003, Torchmark affiliate United American
Insurance settled charges that it had defrauded senior citi-
zens in the sale of Medicare policies. A two-year investiga-
tion in Minnesota concluded the company had misled
hundreds of people into purchasing supplemental
Medicare insurance policies. According to the report,
United American aggressively pressured hundreds of sen-
iors into buying insurance that was more expensive and
less comprehensive than the insurance they already had,
which was a violation of state law. Internal documents
showed that company agents were encouraged to act as if
they were representing federal agencies or senior service
centers. United American used a subsidiary, Consumer
Support Services, which sent mass mailings to elderly citi-
zens signed from the “Medicare Supplement Division.”
Agents would then set up meetings to offer information
packets, which in reality were home-sales opportunities.
The fraud was reported by United American’s own
employees. The company also deliberately delayed premi-
um refunds and lied to authorities about its reserves. The
Minnesota Commerce Department Commissioner said of
the case, “This is not a case of rogue agents. These are not
technical violations. This is irresponsible corporate cul-
ture at work.”164 A subsequent report from the state Office
of the Legislative Auditor criticized the settlement because
it had allowed United American several improper conces-
sions. Among these were a confidentiality provision that
kept the deal secret, an agreement not to report the com-
pany to the National Association of Insurance
Commissioners (NAIC), and an agreement to characterize
the company’s payment as a “fee reimbursement,” not a
penalty or fine.165 It was at least the third time United
American had been found to have broken Minnesota
insurance laws. At the time, ten states had issued at least
26 enforcement actions against the company.166
Even Torchmark’s own employees are not immune from
the company’s desire to put profits over people. In 1998,
Liberty National incurred a multimillion dollar verdict for
age discrimination claims put forward by its employees.
Evidence presented at the trial highlighted one particularly
aggressive manager, Andy King.167 Ironically, in 2006,
Torchmark CEO Mark McAndrew brought in Andy King
to shake up Liberty National’s employees. Newly installed
as President and Chief Marketing Officer of Liberty
National, King would oversee what McAndrew described as
a move from “socialistic” compensation to a “capitalistic”
approach.168 McAndrew went on, “There is no doubt mov-
ing Andy out there we will see an improvement in the
recruiting and new agent hiring. As far as these people that
are at extremely low production level, this has been a long
term problem. It is something that has gone on for years,
so it’s not anything new. Some of those are veteran agents.
Most of those would be more veteran agents. It has been
accepted for a number of years, and it is something we’re
changing. So it’s really not a new problem.”
Torchmark got a taste of its own medicine in 2003
when Waddell and Reed, a unit that Torchmark itself had
spun off in 1998, conspired to switch policyholders from
United Investors Life, another Torchmark subsidiary, to
rival Nationwide. When United Investors sued, Waddell
and Reed filed a civil racketeering claim against
Torchmark accusing its former parent of scheming to
continue its hold over Waddell after it was spun off.
Torchmark eventually prevailed.169
21
The Ten Worst Insurance Companies in America
CEO: Edmund F. (Ted) Kelly
2005 compensation $27 million
HQ:
Boston, MA
Profits: $1.5 billion (2007)
Assets: $94.7 billion170
Like Allstate and State Farm, Liberty Mutual hired con-
sulting giant McKinsey & Co. and adopted deny, delay,
and defend tactics. The company has also gone one fur-
ther than simple claims-handling abuses by indulging
in what regulators allege is systematic bid-rigging.
Like Allstate and State Farm before it, Liberty Mutual hired
consulting giant McKinsey & Co. to boost its bottom line.
The McKinsey strategy relies on lowering the amounts
paid in claims, no matter whether the claims were valid or
not. By all accounts, Liberty Mutual has not become as
notorious as its rivals for the deny, delay, and defend tactics
that McKinsey encouraged. However, that has not stopped
the company from leading the way in complaint rankings
and stories of short-changed victims.171 In fact, Liberty
Mutual is facing a glut of litigation from its own vendors
who say the company’s cost-cutting has resulted in poor
claims processing and a spike in lawsuits.172
Like several other big property casualty insurers,
Liberty Mutual has also begun abandoning policyholders
across the country. The company has pulled out of many
states—not only hurricane susceptible states such as
Florida and Louisiana, but also northern states such as
Connecticut, Rhode Island, Maryland, Massachusetts, and
much of New York. A 2007 New York Times article high-
lighted Liberty Mutual policyholders James and Ann Gray
of Long Island. The Grays were “nonrenewed” by Liberty
Mutual despite the fact that they lived 12 miles from the
coast and had “been touched by rampaging waters only
once, when the upstairs bathroom overflowed.” In fact,
Liberty Mutual and its big name competitors have left
more than 3 million homeowners stranded over the last
few years.173 New York regulators chastised Liberty Mutual
for tying nonrenewals to whether a policyholder had an
auto policy or other coverage, against state law.174
Liberty Mutual has also gone where even its big prop-
erty casualty rivals Allstate and State Farm have feared to
tread by trying its hand at massive corporate fraud. While
the likes of AIG, Zurich, and ACE settled charges that they
colluded with broker Marsh & McLennan in a huge bid-
rigging fraud, Liberty Mutual remains the only insurance
company that refuses to concede guilt. The fraud centered
around fake bids that companies submitted to Marsh in
order to garner artificially inflated rates. Liberty Mutual
claims its business practices were lawful and that regula-
tors’ settlement demands are “excessive.”175
22
10. Liberty Mutual
The insurance industry is in dire need of reform. For too
many insurance companies, profits have clearly trumped
fair dealing with policyholders. The industry has done all
it can to maximize its profits and rid itself of claims.
Allstate CEO Thomas Wilson outlined the strategy when
he said the company had “begun to think and act more
like a consumer products company.”176 Allstate has enjoyed
a return double that of the S&P 500, but its policyholders
have suffered cancellations, nonrenewals, and punishing
loss-prevention techniques.177 Wilson has been unrepen-
tant: “Our obligation is to earn a return for our share-
holders.”178
Wilson is one of many insurance leaders who have lost
sight of their legal and ethical responsibility to policy-
holders. Now they answer only to Wall Street. The time is
due for insurance reform that will level the playing field
for consumers.
Three Pro-Consumer Insurance Reforms
1. Require Insurers to Work in Good Faith with
Consumers
Many states have introduced, and some have passed,
“Insurer Fair Conduct” bills which establish a private
right of action by a first and/or third party against insur-
ers for failure to act in good faith. Insurers must be held
to fair conduct standards when evaluating and settling
claims.
2. Require Prior Approval of Rate Increases
Require insurers to obtain commissioner’s approval of
proposed rate increases of 10 percent or greater, and
authorize interested parties to intervene in rate proceed-
ings. In most states, insurers can raise rates without the
approval of the Insurance Commissioner. Rates are either
automatically approved absent action on the part of the
Commissioner, or the Commissioner has no authority to
disapprove increases. The goal is to explicitly authorize—
or even require—the Commissioner to hold a hearing
prior to approval.
3. Establish an Insurance Consumer Advocate
States should ensure there is a consumer advocate either
on the state’s Insurance Commission or within the office
of the Insurance Commissioner. Some states have already
done so. For example, in 1991, the West Virginia legisla-
ture created the Office of Consumer Advocacy, charged
with representing consumers’ interests in health care
issues. The Consumer Advocate is also authorized to rep-
resent the public interest in matters coming before the
Insurance Commission.
23
Conclusion
1. “In Tough Hands at Allstate,” BusinessWeek, May 1, 2006.
2. “Analysts: U.S. Insurers Sitting With Excess Capital Face Rocky
Road,” Insurance Journal, June 5, 2008.
3. 2006 premiums totaled $1,032,512,780,000: “Net Premiums Written,
Property/Casualty and Life/Health,” Insurance Information Institute
(III), http://www.iii.org/economics/national/premiums/.
4. “Insurers as Investors,” Insurance Information Institute,
http://www.iii.org/economics/investors/intro/.
5. “Industry Financials and Outlook,” Insurance Information Institute
(III), http://www.iii.org/media/industry/; “Life Insurance,” Insurance
Information Institute (III), http://www.iii.org/media/facts/
statsbyissue/life/.
6. “CEOs Rake in Cash but not Stock,” National Underwriter, January 2,
2008.
7. Charles Duhigg, “Aged, Frail, and Denied Care by Their Insurers,”
The New York Times, March 26, 2007, www.nytimes.com/2007/03/26/
business/26care.html?ex=117.
8. Fortune 500, CNNMoney.com; AP, “Allstate CEO Gets $10.7M in
First Year,” CNBC, April 2, 2008, http://www.cnbc.com/id/23925420/
for/cnbc.
9. Spencer Hsu, “Insurers Retreat from Coasts,” Washington Post,
April 30, 2006, http://www.washingtonpost.com/wp-dyn/content/
article/2006/04/29/AR2006042901364.html.
10. “In Tough Hands at Allstate,” BusinessWeek, May 1, 2006.
11. There is no better analysis of the McKinsey documents than the
book, “From ‘Good Hands’ to Boxing Gloves,” by David Berardinelli,
Michael Freeman, and Aaron DeShaw.
12. David Dietz and Darrell Preston, “The Insurance Hoax,” Bloomberg
News, September 2007.
13. Drew Griffin and Kathleen Johnston, “Auto Insurers Play Hardball
in Minor-Crash Claims,” CNN, February 9, 2007.
14. David Dietz and Darrell Preston, “The Insurance Hoax,” Bloomberg
News, September 2007.
15. “The Good Hands Company Or A Leader in Anti-Consumer
Practices?” Consumer Federation of America, July 18, 2007.
16. “Insurance Commissioner Tyler Fines Allstate $750,000 for Non-
Compliant Consumer Notices,” Maryland Insurance Administration
(MIA) Press Release, December 20, 2007.
17. “Texas Reaches Agreement with Allstate Regarding Homeowners
Insurance Reductions and Refunds,” Texas Department of Insurance
Press Release, May 12, 2008.
18. Michelle Kupra, “Allstate Sponsorships Raise Local Ire,” New
Orleans Times-Picayune, January 6, 2008.
19. “Home Insurers’ Secret Tactics Cheat Fire Victims, Hike Profits,”
Bloomberg.com, August 3, 2007.
20. David Dietz and Darrell Preston, “The Insurance Hoax,” Bloomberg
News, September 2007.
21. David Dietz and Darrell Preston, “The Insurance Hoax,” Bloomberg
News, September 2007.
22. “In Tough Hands at Allstate,” BusinessWeek, May 1, 2006.
23. “Duel in the Sun,” Best’s Review, March 2008.
24. Rebecca Mowbray, “Allstate Postings Don’t Include Catastrophe
Claim Information,” New Orleans Times-Picayune, April 11, 2008.
25. David Dietz and Darrell Preston, “The Insurance Hoax,” Bloomberg
News, September 2007.
26. “In Tough Hands at Allstate,” BusinessWeek, May 1, 2006.
27. “Allstate’s Smart Policies,” Barron’s Online, December 10, 2007.
28. Partial Transcript of Presentation to Edward M. Liddy, Chairman
and CEO, The Allstate Corporation Twenty-First Annual Strategic
Decisions Conference, Sanford C. Bernstein & Co., June 2, 2005.
29. Peter Gosselin, “Insurers Learn to Pinpoint Risks—and Avoid
Them,” Los Angeles Times, November 28, 2006; California
Department of Insurance Press Release, May 23, 2007; One of
Allstate’s affiliates, Deerbrook Auto Insurance, has announced
it is pulling out of the California market. (See http://www.
insurancejournal.com/news.west/2007/06/28/81199.htm.)
30. Stephanie Grace, “Bad Policy: Allstate Cancellations Draw the
Scrutiny of Insurance Commissioner Jim Donelon,” New Orleans
Times-Picayune, March 11, 2007.
31. “Editorial: Be Prudent on Insurance,” New Orleans Times-Picayune,
May 20, 2007. Also see articles “Allstate Defies La. Insurance Chief,”
New Orleans Times-Picayune, March 9, 2007 and “Allstate Finds Way
Around State Rule,” New Orleans Times-Picayune, April 25, 2007.
32. Molly McCartney, “Insurance: ‘Dumped at the Altar’ by Allstate,”
The Anna Maria Islander, April 10, 2007.
24
Notes
33. Randy Diamond, “Allstate Policy Cuts Get Scrutiny,” Palm Beach
Post, February 4, 2008.
34. “Allstate Agrees to Comply with Directive on Not Renewing Coastal
Homeowners Policies,” New York State Insurance Department,
September 12, 2007.
35. Marc Lifsher, “Is Allstate’s New Policy A Brushoff?” Los Angeles
Times, February 16, 2007.
36. Joseph Treaster, “Small Clause, Big Problem,” The New York Times,
August 4, 2006.
37. Brian Faler, “Lott, ‘Scorned’ After Katrina, Targets State Farm,
Allstate,” Bloomberg News, May 21, 2007.
38. Fortune 500, CNNMoney.com; Forbes.com, http://www.
forbes.com/finance/mktguideapps/personinfo/
FromPersonIdPersonTearsheet.jhtml?passedPersonId=894922;
39. Peter Gosselin, “The Safety Net She Believed In Was Pulled Away
When She Fell,” Los Angeles Times, August 21, 2005.
40. Peter Gosselin, “The Safety Net She Believed In Was Pulled Away
When She Fell,” Los Angeles Times, August 21, 2005.
41. David Plumb—Bloomberg News, “Insurer Outs CEO, Names
Interim Chief,” Pittsburgh Post-Gazette, April 1, 2003.
42. Peter Gosselin, “The Safety Net She Believed In Was Pulled Away
When She Fell,” Los Angeles Times, August 21, 2005.
43. Victoria Colliver, “State Fines Big Insurer $8 Million,” San Francisco
Chronicle, October 3, 2005.
44. Charles Duhigg, “Aged, Frail, and Denied Care by Their Insurers,”
The New York Times, March 26, 2007.
45. “Insurance Watchdog Petitions California Commissioner to Bar
‘Outlaw’ Insurer,” Insurance Journal, September 6, 2006.
46. Daniel Yi, “Case Reviews Fall Short for Hurt Workers,” Los Angeles
Times, April 12, 2007.
47. “Grassley Seeks Information from Long-Term Care Insurance
Providers,” Senator Grassley Press Release, October 2, 2007.
48. “Sacked AIG Chief To Get Up To 68 Mln Dlrs: Watchdog,” AFP,
June 18, 2008; AIG DEF 14a SEC filing, May 2008; Fortune 500
2008, CNNMoney.com.
49. Dean Starkman, “AIG’s Other Reputation,” Washington Post,
August 21, 2005.
50. Dean Starkman, “AIG’s Other Reputation,” Washington Post,
August 21, 2005; Carl T. Hall, “Big Insurer is Tough on Claims,”
San Francisco Chronicle, July 30, 1990.
51. Dean Starkman, “AIG’s Other Reputation,” Washington Post,
August 21, 2005.
52. Carl T. Hall, “Big Insurer is Tough on Claims,” San Francisco
Chronicle, July 30, 1990.
53. Dean Starkman, “AIG’s Other Reputation,” Washington Post,
August 21, 2005.
54. “McCollum, Sink and McCarty Announce $12.5 Million AIG
Insurance Settlement,” Florida Office of Insurance Regulation,
January 29, 2008.
55. “California Insurance Commissioner Steve Poizner Announces
$443.5 Million Arbitration Award,” California Department of
Insurance Press Release, March 2, 2007.
56. “Insurer Sees Hurricane As Chance to Boost Rates; AIG Memo Sent
Out as Storm Crashed Ashore,” Washington Post, September 5,
1992.
57. James Flanigan, “Higher Premiums Are Likely to Slow Economy,”
Los Angeles Times, October 21, 2001.
58. Joseph Treaster, “Insurance Prices Soaring, A.I.G. Chief Says,”
The New York Times, October 10, 2001.
59. Chris Woodard, “New York, New York Rate Hikes Put Insurance
Giant In Driver’s Seat,” Investor’s Business Daily, November 29,
2001.
60. Joseph Treaster, “Insurance Prices Soaring, A.I.G. Chief Says,”
The New York Times, October 10, 2001.
61. “Financial Crimes Report to the Public,” Federal Bureau of
Investigation (FBI), May 2005.
62. Ron Scherer, “A Top Insurance Company as the New Enron?”
Christian Science Monitor, April 1, 2005.
63. Diane Brady and Marcia Vickers, “AIG: What Went Wrong,”
BusinessWeek, April 11, 2005.
64. Mark Ruquet, “Fraud Trial Targets Gen Re, AIG Execs,” National
Underwriter, January 14, 2008.
65. “Ex-AIG Chief Greenberg May Face SEC Charges,” Reuters, May 21,
2008; Diane Brady and Marcia Vickers, “AIG: What Went Wrong,”
BusinessWeek, April 11, 2005; Reuters, “Greenberg SEC Probe Looks
at Two Deals: Report,” Business Insurance, May 27, 2008.
66. “American International Group (AIG) Companies Fined for
Violating Insurance, Workers’ Comp Laws,” Oregon Department of
Consumer & Business Services Press Release, July 5, 2007; “Holland
Announces Biggest Insurance Fine in State History,” Oklahoma
Insurance Department Press Release, March 20, 2007; Reuters, “AIG
Faces Lawsuit By Florida Pension Fund,” Business Insurance, May
22, 2008.
67. “ATLA Blasts Greenberg for Terrorist Remark; TTLA Follows Suit,”
Insurance Journal, February 27, 2004; Phil Milford, “Judge Says Ex-
CEO Can’t Countersue AIG Officials,” Washington Post, June 14,
2007; “AIG’s Former Chairman Hank Greenberg Sues Group,”
Forbes, June 21, 2007.
68. “Hank Greenberg Sues AIG, Saying it Hid Losses,” MarketWatch,
May 11, 2008; Bloomberg News, “AIG Sues Former Chief Over $20
Billion in Stock,” International Herald Tribune, March 27, 2008.
69. William Selway, Martin Z. Braun and David Dietz, “Broken
Promises,” Bloomberg.com, October 4, 2006.
70. Fortune 500, CNNMoney.com; Michelle Koetters, “State Farm
Reports Record Earnings for 2007,” The Pantagraph, March 1, 2008.
71. “Epsilon blows as hurricane season ends,” UPI, November 30, 2005;
“Deaths of evacuees push toll to 1,577,” New Orleans Times-
Picayune, May 19, 2007.
25
The Ten Worst Insurance Companies in America
72. “Insurance Claims Payment Processes in the Gulf Coast after the
2005 Hurricanes,” Testimony of Robert Hartwig before the U.S.
House Financial Services Committee Subcommittee on Oversight
and Investigations, February 28, 2007.
73. “Miss. Attorney General Sues State Farm for Breach of Contract,”
Insurance Journal, June 12, 2007.
74. See Amy Bach et al, “Lessons Learned After the Storms,” TRIAL,
August 2007, citing email from Neysa P. Hurst, Asst. Dir. Office of
Property & Casualty Consumer Affairs, Louisiana Dept. of Ins. to
Amy Bach, May 9, 2007.
75. “Live From...”, CNN, 6/1/06, http://transcripts.cnn.com/
TRANSCRIPTS/0606/01/lol.03.html.
76. “Katrina Victims Challenge Insurance Denials—NOLA Flooding
Caused by Human Neglect of Levees, One Suit Argues,”
ConsumerAffairs.com, 9/20/05, http://www.consumeraffairs.com/
news04/2005/katrina_scruggs.html.
77. “Home Insurers’ Secret Tactics Cheat Fire Victims, Hike Profits,”
Bloomberg.com, August 3, 2007.
78. Brian Faler, “Lott, ‘Scorned’ After Katrina, Targets State Farm,
Allstate,” Bloomberg News, May 21, 2007.
79. “State Farm Pays Additional $29.8 Million in Katrina Claim Re-
Evaluations,” Mississippi Insurance Department Press Release, August
13, 2007.
80. Holbrook Mohr, “Miss A.G.: State Farm Suit Based on ‘Lies,
Speculation and Innuendo,” Insurance Journal, February 5, 2008.
81. Reynolds Holding, “A Big Corporate SLAPP in Citizen’s Faces,”
San Francisco Chronicle, October 22, 2000.
82. Associated Press, “State Farm Questioning Haag Engineering Firm’s
Katrina Work,” Insurance Journal, September 25, 2006, www.
insurancejournal.com/news/southeast/2006/09/25/72759.htm.
83. “State Farm profit drops 22% in ‘99,” The Chicago Daily Herald,
March 3, 2000.
84. “State Farm CEO Gets 82% Pay Raise,” Insurance Journal, March 7,
2007.
85. Tom Zucco, “State Farm to Florida Homeowners: No Thanks,”
Tampa Bay Times, February 23, 2008; Tom Zucco, “State Farm’s
Nonrenewal Estimate Low,” Tampa Bay Times, November 2, 2007,
86. “Insuring America: Homeowners Due Insurance Help,” The
Oklahoman, September 10, 2003.
87. “Our View on Filling Court Seats,” USA Today, November 5, 2007.
88. Fortune 500, CNNMoney.com; Forbes.com, http://www.
forbes.com/finance/mktguideapps/personinfo/
FromPersonIdPersonTearsheet.jhtml?passedPersonId=1100460
89. Charles Duhigg, “Aged, Frail and Denied Care by their Insurers,”
The New York Times, March 26, 2007.
90. Charles Duhigg, “Aged, Frail and Denied Care by their Insurers,”
The New York Times, March 26, 2007.
91. Charles Duhigg, “Aged, Frail and Denied Care by their Insurers,”
The New York Times, March 26, 2007.
92. Stephen Taub, “Judge Orders $63 Million Conseco Payback,”
CFO.com, October 25, 2004.
93. Stephen Taub, “Judge Orders $63 Million Conseco Payback,”
CFO.com, October 25, 2004.
94. “Conseco Founder’s Ind. Mansion Taken off Auction Block,”
Associated Press, January 8, 2007.
95. Matthew Dublin, “Commission Closes Conseco Fraud Case,”
CCH Wall Street, July 14, 2006.
96. Charles Duhigg, “Aged, Frail and Denied Care by their Insurers,”
The New York Times, March 26, 2007.
97. Charles Duhigg, “Aged, Frail and Denied Care by their Insurers,”
The New York Times, March 26, 2007.
98. Charles Duhigg, “Aged, Frail and Denied Care by their Insurers,”
The New York Times, March 26, 2007.
99. Press Release: State Insurance Regulators Fine Conseco, National
Association of Insurance Commissioners, May 7, 2008.
100. Fortune 500, CNNMoney.com; Forbes.com, http://www.
forbes.com/finance/mktguideapps/personinfo/
FromPersonIdPersonTearsheet.jhtml?passedPersonId=870274
101. Robert Kazel, “Anthem, WellPoint Merge Into Largest Health
Plan,” Amednews.com, December 20, 2004.
102. Patrick McGeehan, “The Agenda: A Win-Win Merger (For the
Bosses, That Is), The New York Times, July 4, 2004.
103. Lisa Girion, “Blue Cross Cancellations Called Illegal,” Los Angeles
Times, March 23, 2007
104. Press Release: California Insurance Commissioner Steve Poizner
Announces $12.6 million Action Against Blue Shield for
Rescissions and Poor Claims Processing,” California Department
of Insurance, December 13, 2007.
105. Press Release: California Insurance Commissioner Steve Poizner
Announces $12.6 million Action Against Blue Shield for
Rescissions and Poor Claims Processing,” California Department
of Insurance, December 13, 2007.
106. Lisa Girion, “L.A. Sues Anthem Blue Cross Over Rescissions,”
Los Angeles Times, April 17, 2008.
107. Lisa Girion, “L.A. Sues Anthem Blue Cross Over Rescissions,”
Los Angeles Times, April 17, 2008.
108. Press Release: Insurance Commissioner Announces Agreement
with Rocky Mountain Hospital and Medical Service, Inc. d/b/a/
Anthem Blue Cross and Blue Shield, Nevada Division of
Insurance, January 7, 2008.
109. Press Release: Two Insurance Companies Refund Colorado
Customers $5.7 Million for Billing Errors and Inaccurate
Recordkeeping, Colorado Division of Insurance, February 14, 2008.
110. Press Release: Anthem Directed to Refund $23.7 Million to 81,000
Elderly, Disabled in Kentucky, Kentucky Office of Insurance,
November 22, 2005.
111. Victoria Colliver, “WellPoint Settles Suit with Doctors,”
San Francisco Chronicle, July 12, 2005, D1.
26
The Ten Worst Insurance Companies in America
112. Lisa Girion, “Doctors Balk at Request for Data,” Los Angeles Times,
February 12, 2008.
113. Lisa Girion, “Doctors Balk at Request for Data,” Los Angeles Times,
February 12, 2008.
114. The Global 2000, Forbes.com, http://www.forbes.com/lists/
2008/18/biz_2000global08_The-Global-2000_Rank.html.
115. ConsumerReports.org, Ratings Homeowner Insurance, September
2004; JD Power, http://www.jdpower.com/insurance.
116. “Zurich, 9 States Settle Bid-Rigging Case for $171 Million,”
Insurance Journal, March 19, 2006; “Zurich American Implements
Reforms, Pays Consumers Millions: Giant Insurer Settles Suits
Brought By States,” ConsumerAffairs.com, December 7, 2006;
“Zurich Settles Bid-Rigging Probe,” New York Attorney General’s
Office Press Release, March 27, 2006.
117. Claudia Rowe, “Woman Fights Insurance Giant and Wins,” Seattle
Post-Intelligencer, October 20, 2005.
118. Market Conduct Examination Report: Farmers Insurance
Exchange, North Dakota Insurance Department, June 2007.
119. Candace Heckman, “Low-Ball Offers Nothing New in Insurance
Industry,” Seattle Post-Intelligencer, May 15, 2003.
120. Market Conduct Examination Report: Farmers Insurance
Exchange, North Dakota Insurance Department, June 2007.
121. David Dietz and Darrell Preston, “The Insurance Hoax,”
Bloomberg, September 12, 2007.
122. David Dietz and Darrell Preston, “The Insurance Hoax,”
Bloomberg, September 12, 2007.
123. Market Conduct Examination Report: Farmers Insurance
Exchange, North Dakota Insurance Department, June 2007; “N.D.
Regulator Fines Farmers $750,000,” Associated Press, July 2, 2007.
124. David Dietz and Darrell Preston, “The Insurance Hoax,”
Bloomberg, September 12, 2007.
125. “Farmers’ Rates Prompt State Action,” Texas Insurance News, Texas
Department of Insurance, September 2002.
126. R.A. Dyer, “Farmers Draws Most Insurance Complaints,” Fort
Worth Star-Telegram, November 19, 2003.
127. Terrence Stutz, “State Farm Asks Court to Prevent Forced Rate
Cut,” Dallas Morning News, December 3, 2004.
128. “Anniversary of Deadly Northridge Quake,” KABC 7, January 17,
2006.
129. Virginia Ellis, “Quakenbush OKd Deal to Shield Firm from Fines,”
Los Angeles Times, April 27, 2000.
130. Karen Robinson-Jacobs, “Homeowners Win $20 Million from
Insurer in Settlement,” Los Angeles Times, March 7, 2000.
131. Virginia Ellis, “Quackenbush OKd Deal to Shield Firm from
Fines,” Los Angeles Times, April 27, 2000.
132. Virginia Ellis, “Quackenbush OKd Deal to Shield Firm from
Fines,” Los Angeles Times, April 27, 2000.
133. Virginia Ellis, “Quackenbush OKd Deal to Shield Firm from
Fines,” Los Angeles Times, April 27, 2000.
134. Lynda Gledhill, “Embattled Quackenbush Quits in Disgrace,
Resignation Doesn’t End Legal Problems for Insurance
Commissioner,” San Francisco Chronicle, June 29, 2000.
135. Market Conduct Examination Report: Farmers Insurance
Exchange, North Dakota Insurance Department, June 2007.
136. Marc Lifsher, “Farmers Insurance to Pay Refund,” Los Angeles
Times, September 6, 2007.
137. http://finapps.forbes.com/finapps/jsp/finance/compinfo/
CIAtAGlance.jsp?tkr=UNH; April 2007 UnitedHealth Def 14a
SEC Filing http://www.sec.gov/Archives/edgar/data/731766/
000119312508093196/ddef14a.htm#toc78885_21.
138. “Health Insurance,” Insurance Information Institute (III),
http://www.iii.org/media/facts/statsbyissue/health/.
139. George Anders, “UnitedHealth Directors Strive to Please Chief,”
Wall Street Journal, April 18, 2006.
140. George Anders, “UnitedHealth Directors Strive to Please Chief,”
Wall Street Journal, April 18, 2006.
141. George Anders, “UnitedHealth Directors Strive to Please Chief,”
Wall Street Journal, April 18, 2006.
142. Vanessa Fuhrman, “Options Data Unsealed in UnitedHealth Case,”
Wall Street Journal, June 11, 2008.
143. Joshua Freed, “UnitedHealthcare’s Stock Options Problem,”
Associated Press, October 16, 2006.
144. Peter Lattman, “UnitedHealth CEO McGuire Gives Back $620
Million,” Wall Street Journal, December 7, 2007.
145. Peter Lattman, “UnitedHealth CEO McGuire Gives Back $620
Million,” Wall Street Journal, December 7, 2007.
146. Sarah Lueck and Vanessa Fuhrmans, “New Medicare Drug Benefit
Sparks an Industry Land Grab,” Wall Street Journal, January 25,
2006.
147. Sarah Lueck and Vanessa Fuhrmans, “New Medicare Drug Benefit
Sparks an Industry Land Grab,” Wall Street Journal, January 25,
2006.
148. Karl Stark, “Some See Conflict in Dual Role,” Philadelphia
Inquirer, December 20, 2007, A01.
149. Karl Stark, “Some See Conflict in Dual Role,” Philadelphia
Inquirer, December 20, 2007, A01.
150. Robert Pear, “Medicare Audits Show Problems in Private Plans,”
The New York Times, October 7, 2007.
151. David Phelps, Where Costs and Care Collide,” Star Tribune, June
25, 2006.
152. David Wren, “Insurance Firm Rankles S.C. Doctors,” Myrtle Beach
Sun News, December 21, 2007.
153. Scott Simonson, “UnitedHealthcare fined $364,750,” Arizona Daily
Star, March 11, 2006.
154. David Phelps, “Where Costs and Care Collide,” Star Tribune, June
25, 2006.
155. David Phelps, “Where Costs and Care Collide,” Star Tribune, June
25, 2006.
27
The Ten Worst Insurance Companies in America
156. Reed Abelson, “Inquiry Set on Health Care Billing,” The New York
Times, February 14, 2008.
157. Pamela Yip, “CEOs Rewarded Nicely in 2007,” Dallas Morning
News, May 4, 2008; Fortune 500 2008, CNNMoney.com.
158. “Torchmark Corporation,” Hoovers Company In-Depth Reports,
June 4, 2008.
159. Russell Hubbard, “Torchmark’s Andrew Named CEO,”
Birmingham News, August 3, 2005; “Settlement Reached in
Language Bias Case,” San Jose Mercury News, September 19, 1991.
160. “Torchmark’s Stock Falls,” Mobile Register, October 27, 1993.
161. Jane Bryant Quinn, “Your Health May Suffer From Deception of
These Agents,” Pittsburgh Post-Gazette, April 12, 1999.
162. “Torchmark Corporation,” Hoovers Company In-Depth Reports,
June 4, 2008.
163. Sherri Goodman, “Judge Sets Liberty National Settlement,”
Birmingham News, April 6, 2006.
164. Glenn Howatt, “Medicare Insurer Under Scrutiny,” Minneapolis-
St. Paul Star Tribune, August 7, 2002; Melanie Evans, “Insurance
Company Accused of Exploitive Sale Tactics,” Duluth News
Tribune, August 7, 2002; Neal St. Anthony, “State Wants to Pull
Insurer’s License and Levy Record Fine,” Minneapolis-St. Paul Star
Tribune, July 31, 1993; John Kirkpatrick, “Mailings to Elderly
Draw Fire,” Dallas Morning News, January 11, 1987.
165. “Mutual Mistrust,” Minneapolis-St. Paul Star Tribune, August 26,
2003; Patrick Howe (AP), “Legislative Auditor Questions Secrecy
Clause,” Duluth News Tribune, August 21, 2003.
166. Glenn Howatt, “Medicare Insurer Under Scrutiny,” Minneapolis-
St. Paul Star Tribune, August 7, 2002.
167. Hipp v. Liberty National Ins., U.S. 11th Circuit Court of Appeals,
2001.
168. Torchmark Corporation 4th Quarter 2005 Conference Call,
February 9, 2006, http://www.torchmarkcorp.com/Resources/
4th%Quarter%202005%20Conference%20Call.pdf.
169. “Insurance Firms in a Contract Fight in Alabama,” National Law
Journal, February 3, 2003; “Waddell & Reed Settles with Colo.
Regulators,” Denver Business Journal, May 4, 2006; Mark Davis,
“Mutual Fund Firm’s Claims are Rejected,” Kansas City Star,
September 10, 2004.
170. Sasha Talcott, “Insurance Firm Chief Gets $27M in 2005,” Boston
Globe, June 14, 2006; “Fortune 500 2007,” CNN, http://money.cnn.
com/magazines/fortune/fortune500/2007/snapshots/790.html.
171. Nina Wu, “Insurance Complaint Ranking Released,” Honolulu Star
Bulletin, December 8, 2007; David Dietz and Darrell Preston, “The
Insurance Hoax,” Bloomberg News, September 2007.
172. Craig Douglas, “Liberty Stumbles in $100M Legal Spat With
OneBeacon,” Boston Business Journal, December 21, 2007.
173. Paul Vitello, “Hurricane Fears Cost Homeowners Coverage,”
The New York Times, October 16, 2007.
174. “Allstate to Comply With N.Y. Anti-Tying Rule on Home
Nonrenewals,” Insurance Journal, September 12, 2007.
175. Rupal Parekh, “Liberty Mutual Bid-Rigging Suit Can Proceed,”
Business Insurance, March 30, 2007.
176. Thomas J. Wilson, Pres. & CEO of Allstate Ins. Co., Remarks
(Merrill Lynch Insurance Investor Conference , New York, N.Y.,
Feb. 13, 2007), http://media.allstate.com/categories/24-speeches/
releases/4053-merrill-lynch-insurance-investor-conference-
remarks-thomas-j-wilson.
177. Edward M. Liddy, Chairman & CEO of Allstate Ins. Co., Remarks
(Credit Suisse Ins. Conference, New York, N.Y. Nov. 17, 2006),
http://media.allstate.com/categories/24-speeches/releases/4051-
credit-suisse-insurance-conference-remarks-edward-m-liddy.
178. Spencer S. Hsu, “Insurers Retreat from Coasts,” Washington Post,
April 30, 2006, www.washingtonpost.com/wp-dyn/content/
article/2006/04/29/AR2006042901364.html.
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The Ten Worst Insurance Companies in America