Allstate is facing criticism following a scathing report that, among other things, accuses the company of being a leader in developing anti-consumer claim practices.
The allegations are part of a 35-page report issued by J. Robert Hunter on behalf of the Consumer Federation of America (CFA), a non-profit association of 300 organizations that seeks to advance the consumer interest through research, advocacy, and education. In it, Allstate is criticized for using a software program that allows insurers to determine the percentage amount of “savings” it wants as a benchmark, which in turn causes the software to adjust costs like claim payouts (many but not all insurers use similar software, the report carefully notes).
Allstate also is portrayed as a trailblazer in adopting claim practices that limit the amounts it pays out in claims, leading other insurance companies to follow suit. Among the techniques mentioned is the inclusion of anti-concurrent causation language in homeowners' policies, which essentially allows an insurer to deny a claim if two events contribute to a loss, but only one is covered. This type of language became well documented in New Orleans after Hurricane Katrina made landfall, causing extensive wind damage (a covered loss) followed by severe flooding (an excluded loss) after the levee system breach.
The report also notes that Allstate faces significant complaints made to state departments of insurance regarding its claim settlement procedures, and that it actively promotes governmental programs such as the National Flood Insurance Program, the Terrorism Risk Insurance Act, and quasi-governmental companies such as Citizens of Florida and Citizens of Louisiana, to limit its levels of risk.
The criticism was refuted by Allstate, which pointed to another third-party report that found nothing wrong with the way the company handled Katrina claim payments.
“Allstate has been a successful company for 75 years for many reasons, one of which is that it fairly settles claims,” said Allstate spokesperson Mike Siemienas. “For nearly a decade, there have been accusations that our [claim system redesign] is unfair to Allstate's policyholders and third-party claimants, and that it takes money from them and puts it into the pockets of Allstate's shareholders. Those accusations are completely false. The system was designed and implemented to bring more consistency to the claim investigation and evaluation process, to enhance service to policyholders, and to continue to ensure Allstate is paying what is owed at the appropriate time based on the merits of each claim.”
Indeed, a market conduct evaluation published by the Louisiana Department of Insurance in 2006, a year after Katrina hit the region, supports the company's assertions. Specifically, the report, which was authored by Richard Spong, said, “Claims that were tested that had threatened litigation were examined noting no unusual or improper claim handling under the circumstances.” He continued, “Allstate responded promptly to examination requests during the course of the [examination]. With the exception of seven payment delays, which occurred during the height of the claim processing and issuance of claim checks, Allstate Insurance Company was found to be compliant with the state statutes, rules, and regulations applicable to the handling of claims in a catastrophic loss situation.”
Allstate also has been recently targeted by public interest law firm Public Justice and consumer rights group Foundation for Taxpayer and Consumer Rights to prevent the company from sealing court records in the case Weiss v. Allstate, which was settled after Weiss was awarded $2.8 million in a bad-faith ruling. The two groups say that the documents reveal claim practices and policies the company used to shortchange homeowners after Hurricane Katrina.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
