In early February 2007, CNN ran a story regarding the settlement strategies and practices of insurance companies regarding car accidents. The story focused on the actions and behaviors of State Farm and Allstate. Here are excerpts of the story:
• State Farm, Allstate employ consultant's strategy, CNN research finds
• Theme of strategy is "deny, delay, defend," former employee says
• Companies convince juries that claims are fraudulent
• Insurers, institute deny treating claimants unfairly
By Drew Griffin and Kathleen Johnston, CNN
ATLANTA, Georgia (CNN) -- If you are injured in a minor car crash, chances are good that you will be in the fight of your life to get the insurance company to pay all the medical costs you incur -- even if the accident was no fault of your own.
That's what CNN discovered in an 18-month investigation into minor-impact soft-tissue injury crashes around the country. Those are accidents in which there is little damage to the vehicle and the injuries to people are not easy to see by the naked eye or conventional medical tools like X-rays.
Since the mid-1990s, most of the major insurance companies -- led by the two largest, Allstate and State Farm -- have adopted a tough take-it-or-leave-it strategy when dealing with such cases.
The result has been billions in profits for insurance companies and little, if anything, for the public, according to University of Nevada insurance law professor Jeff Stempel.
"We can see that policyholders individually are getting hurt by being dragged through the court on fender-bender claims, and yet we don't see any collateral benefit in the form of reduced premiums even for the other policyholders," Stempel said.
"So I think now we can say to continue this kind of program is in my view institutionalized bad faith."
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If you have never heard of the strategy, it's because insurance companies don't want you to know that they are paying out less and less for minor crashes even while their profits soar and your premiums continue to rise.
But after a review of more than 6,000 company documents and court records, interviews with a dozen people nationwide, including former company insiders, and conversations with accident victims, the picture is clear: If you challenge the offer by some insurance companies you will be left with no option but to go to court, where you will be dragged through the wringer.
In an affidavit in a New Mexico case where Allstate is being sued, one of the company's former attorneys said the strategy is to make fighting the company "so expensive and so time-consuming that lawyers would start refusing to help clients."
Shannon Kmatz, a police officer and former Allstate claims agent, said company employees were encouraged to get rid of claims quickly and cheaply and even offered accident victims as little as $50, telling them to take it or leave it.
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For Allstate and State Farm, according to documents obtained by CNN, the strategy was developed in the mid-1990s with the assistance of consulting giant McKinsey & Co.
Looking for a way to boost profits, McKinsey focused on soft-tissue injuries incurred in minor crashes.
While the McKinsey documents -- numbered in the thousands -- are under seal in courts around the country, CNN saw several of them during a court hearing in Lexington, Kentucky.
Playing off Allstate's signature slogan, one document recommends the insurer put boxing gloves on its "good hands" for those who insist on going to court.
The strategy, according to former Allstate and State Farm employee Jim Mathis, relies on the three D's -- denying a claim, delaying settlement of the claim and defending against the claim in court.
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Robert Hartwig, president of the Insurance Information Institute, told CNN insurers do not have a strategy of blanket denial of claims. He also said strategies to limit expenditures on minor-impact crashes are needed to fight fraud.
Hartwig specifically singled out lawyers who he claims make a living on car accident victims, saying those lawyers are upset because "the gravy train is over."
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