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P&C Insurance --- Watchout You may be at Risk
Old 08-18-2007, 01:42 AM   #1
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P&C Insurance --- Watchout You may be at Risk

Absolutely outrageous!

I just saw a show on Public Television about tactics used by the life insurance industry. The show was part of the NOW series... a News Magazine.

Home Insurance 9-1-1 . NOW | PBS

According to this show Large P&C Insurers like Allstate and State Farm are changing th terms of policies. Apparently it is buried in the replacement statement people get each year. For example in California some people had replacement insurance for their homes and then during a yearly renewal the wording was changed to extended. The net result people would not afford to rebuild their homes after the California Fires.

According to the people interviewed by NOW, the insurance company stonewalled and wore them down to take a lesser settlement. Apparently many of them had to fund much of the cost of rebuilding their homes by themselves.

Bloomberg
Quote:
McKinsey & Co., a New York-based consulting firm that has advised many of the world's biggest corporations, according to records in at least six civil court cases.
Quote:
One slide McKinsey prepared for Allstate was entitled ``Good Hands or Boxing Gloves,'' the tape of the Kentucky court hearing shows. For 57 years, Allstate has advertised its employees as the ``Good Hands People,'' telling customers they will be well cared for in times of need.

Outrageous isn't it! link to the Bloomberg article.

Bloomberg.com: Special Report


Here is a challenge to everyone. Please spread this link and message to every board, blog, forum that you participate in. People need to be aware that several insurance companies have changed tactics.

I am going to look into dropping my insurance company... they were listed. I cannot see rewarding them with business. Even if I reviewed my policy and made sure I was covered... why stick with a company that has a stated strategy of doing this to people. They could have put in bold letters on the renewal that their coverage had been reduced... which is in effect what happened.



Anybody have any idea about how to identify a legitimate insurance company?
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Old 08-18-2007, 09:43 AM   #2
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Interesting.... I just saw the end of the article and did not quite get what was happening...


It is interesting to hear the bad side of insurance... but sometimes they lose when they delay... my sister's upstairs bathroom sprung a leak and it created wet sheetrock in the roof and the walls and stained carpet downstairs... well, they did not want to pay for the carpet.. just a small section... well, my sister fought them... guess what... MOLD.. then the insurance company said 'we need a mold test'.. so, one was done and LOTS of mold... well, they wanted something else.. blah blah blah...

In the end... they had to move my sisters family out to an apartment for 3 months... strip out all the carpet in the house.. remove all the bad sheetrock, clean all surfaces inside the house and then rebuild everything back to normal.... cost over $100,000.. and they could have settled for maybe $5K at the beginning if they would have fixed the shower and paid for one room of carpet...
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Old 08-18-2007, 10:08 AM   #3
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I am under the impression that if you have any small claim you will be dropped by your homeowners insurance company. Take out large deductibles.

Great country ain't it.
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Old 08-18-2007, 10:33 AM   #4
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I just saw a show on Public Television about tactics used by the life insurance industry. The show was part of the NOW series... a News Magazine.

Home Insurance 9-1-1 . NOW | PBS

According to this show Large P&C Insurers like Allstate and State Farm are changing th terms of policies. Apparently it is buried in the replacement statement people get each year. For example in California some people had replacement insurance for their homes and then during a yearly renewal the wording was changed to extended. The net result people would not afford to rebuild their homes after the California Fires.
I guess that I dont see the problem....I believe that a lot of insurance companies have moved away from replacement insurance coverage...So if they cant build a new house, they will have to buy an older one...Dont see the companies doing anything wrong if they notified people of the changes at renewal...

I have watched NOW a few times and they seem to have difficulty with simple business concepts...
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Old 08-18-2007, 10:37 AM   #5
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Oh yea... forgot to mention the OTHER SIDE of the insurance game... making you buy a policy higher than you need...

I know that you could tear down my house, haul it away and rebuild the whole thing for less than $150K... but they want to insure it for $175 plus... (remember, contents is separate...)

Now, it seems that if I have a total loss they will not even pay the $150.... and who knows what they will pay for the contents...
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Old 08-18-2007, 10:46 AM   #6
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What are you expecting? An insurance company is in business to make a profit. The more they can charge you and the less they pay out maximizes their profits. DUH!

You need insurance for only those things that would wipe you out. I have the highest deductibles allowed for home and auto. I have a large umbrella policy for liability. I don't want the insurance company involved unless it is the "big one."

BTW -- These are the same companies that sell annuities. Do you think their motives are any different?
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Old 08-18-2007, 02:46 PM   #7
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What are you expecting? An insurance company is in business to make a profit. The more they can charge you and the less they pay out maximizes their profits. DUH!

You need insurance for only those things that would wipe you out. I have the highest deductibles allowed for home and auto. I have a large umbrella policy for liability. I don't want the insurance company involved unless it is the "big one."

Uh... You must not have looked at the info... It was the Big One. These people's houses burned to the ground in California. Or remember the Katrina disaster along Alabama... and the controversy about Insurance companies saying you did not have flood insurance... but the wind had blown the houses down well inland of the water or before the storm surge. It seems that these people filed large claims for total loss of their houses. It is not about a $1000 claim. Some of these people claim they were out hundreds of thousands of dollars.


Myself, I am looking for a new insurer. Might as well do business with one that is ethical and pays if the event occurs. I don't have to learn the hard way. Heck I am paying the same money.

If you even have a whiff of lack of sincerity in your insurer... you had better run!

If you ever have to file a large claim with an insurer and run into problems, you might boldly exclaim, "I will file suit". But when your lawyer asks for a $25000 retainer and charges $300-$400/hour. You will wish you had ensured your insurer was not one of the ones on the list. The insurance company has an army of lawyer on staff and retains specialized law firms for dealing with these situations.

Apparently some lawyer got a copy of the insurers strategy documents from McKinsey. Right now the insurers have been ordered by the courts to turn over papers that outline their strategy (stonewall, play hardball with people who file large claims). They are refusing to turn the documents over and just paying the fines (thumbing their nose). The insurers know that when the documents hit the press... the cat is out of the bag.
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Old 08-18-2007, 03:49 PM   #8
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What is the problem here? I looked at the links and (surprise) it isn't very clear what is happening. Are folks insuring themselves for, say, $250,000 to replace their house if it is lost, and then the insurance company says after the house burns down that they'll only pay $150,000 to rebuild the house? I would have a problem with that.

My understanding of my own Homeowner's policy (w/ traveler's) is that they'll pay up to the coverage amount plus 25% to rebuild the house. They did a detailed estimate of what it costs to rebuild a similar structure and told me what coverage amount I would need. My premium is based on a certain cost per $1000 of coverage. The amount they determined is right around what I could buy a similar house for in my neighborhood. Plus I wouldn't have to rebuild the land underneath the house.

Are these CA homeowners from the Bloomberg article that were "cheated" crying because they insured for $220,000 and now they find out their house cost $309000 to rebuild? I don't see a big problem with this, as they should have known that their insurance covered only 2/3 the cost of their home. Maybe they got the policy 5-10 years ago and the coverage amounts only increased at the rate of inflation while the house construction costs in the area increased at double the rate of inflation (it is CA after all)?

This just seems like another case of "big bad corporations making profits" therefore they must be cheating someone. A number of instances of dishonest behavior were mentioned, but it takes quite a leap of faith to make a general conclusion that all insurance companies mentioned in the article are dirty and won't pay legitimate claims.

The insurance company's goal is to give you as little money as possible while still being "fair". The insured's goal is at a minimum to get fully indemnified and if possible to get as much money as possible. These are two competing goals.

That being said, I do hate the bastard insurance companies and give them as little money as possible by keeping my deductibles as high as possible in general. I assume that upon every interaction with them that they are trying to screw me. They are a necessary evil (that I own a lot of in my stock portfolio! ). My goal is to take as much money from them legally while giving them as little as is legally possible in return. I assume their goal is the same in regards to me.

Edit: I read the bloomberg article a little closer. The CA couple discussed in the opening paragraphs of the article that lost their house are discussed again at the very bottom of the article. They bought their house in 1992. In 1997 their insurer sent letters to the Tunnells and other policyholders saying that it would no longer offer full replacement coverage. In other words, they will pay up to a stated value (the amount you are insuring for), probably plus some percent of overage. Maybe the CA couple should have done their due diligence and made sure that their rapidly appreciating house was adequately insured after a decade. In other words, they were paying for $220,000 worth of coverage for their house when in reality they should have been paying for $306,000 worth. Boy, if their insurer was able to charge them more premiums for more coverage, don't you think they would have?!? The problem is that the CA couple wants unlimited coverage for a small annual premium, or in other words they want something for nothing. I'd like some of that too, know where I can get some?
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Old 08-18-2007, 06:11 PM   #9
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In general, "guaranteed replacement" insurance is a thing of the past. Now, with most companies, you must insure for at least 80% of the replacement value of your home in order to avoid getting your benefits reduced on even a partial loss claim.

With some insurance companies, as long as you insure for the $ amount that their appraisal says, they will cover up to 120% or some similar figure if it costs more than expected to rebuild. Bear in mind that even though consumers often treat insurance as a commodity purchase, its really not. I checked the JD Powers ratings before choosing a company. Many of the major firms are not well rated by their customers, even though they are less expensive than the better rated ones.

In any event, if I ever have to make a large claim against any insurance company, I would certainly hire a public adjuster to help me maximize the benefits of my policy.
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Old 08-19-2007, 03:05 AM   #10
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Edit: I read the bloomberg article a little closer. The CA couple discussed in the opening paragraphs of the article that lost their house are discussed again at the very bottom of the article. They bought their house in 1992. In 1997 their insurer sent letters to the Tunnells and other policyholders saying that it would no longer offer full replacement coverage. In other words, they will pay up to a stated value (the amount you are insuring for), probably plus some percent of overage. Maybe the CA couple should have done their due diligence and made sure that their rapidly appreciating house was adequately insured after a decade. In other words, they were paying for $220,000 worth of coverage for their house when in reality they should have been paying for $306,000 worth. Boy, if their insurer was able to charge them more premiums for more coverage, don't you think they would have?!? The problem is that the CA couple wants unlimited coverage for a small annual premium, or in other words they want something for nothing. I'd like some of that too, know where I can get some?
I think part of the problem is that people went back to their agents because they did not understand the ramification of the wording change from replacement to extended. And the agent told them not to worry the policy offered better coverage.

The issue is not just about the coverage amount either. Apparently some of these insurers are not paying up on the amount covered. They are foot dragging, requiring endless verifications on certain things, canceling meetings, etc. Essentially the people indicated that they were wearing them down to take a lesser negotiated amount. You would probably need to watch the video.

This was apparently a McKinsey recommendation according tot he attorney interviewed.

Since our policies is with one of those insurers... I am not taking it lightly.

The main reason I posted this article was not so everyone cold get worked up into a lather about it (although some seem to side with the P&C industry on this issue), instead so you would act accordingly and protect yourself or attempt to do so.

No matter what you policy states, if they decide to play hard ball and stonewall or tie you up in red tape to wear you down... You would be in bad shape!
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Old 08-19-2007, 07:07 AM   #11
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Justin...

The little I saw of the show the people were told by there agent they were 'fully covered'.... however, the insurance company changed wording to make it there were not covered..

And we all know they are like any other company to make money... BUT, they have a contractual obligation to pay when we have a loss.... IF my house burned down, I expect them to pay 100% (less my deductable) to rebuild AND for the furnishings inside since I have replacement insurance... and I expect them to do it in a timely manner...

The show is saying they are NOT doing that.. they are trying to weasel out of their obligation.. that they lowball their offer and KNOW it is a lowball.. and will fight you if you want to get what is FAIR...
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Old 08-19-2007, 12:46 PM   #12
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What I understand about the McKinsey recommendations is that if a settlement is not accepted, the insurance company should pay hard ball.

The problem with hiring a lawyer is the lawyer will want a percentage of the recovery as a fee. However, if the insurance company acted in bad faith it is possible that punitive damages may be available.
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Old 08-19-2007, 12:50 PM   #13
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What I understand about the McKinsey recommendations is that if a settlement is not accepted, the insurance company should pay hard ball.
The problem with hiring a lawyer is the lawyer will want a percentage of the recovery as a fee. However, if the insurance company acted in bad faith it is possible that punitive damages may be available.
If our house burned to the ground, the first thing we'd do would be to hire a claims adjustor to work with USAA. I'm not handling my first big claim against someone who adjudicates hundreds of them a year.

It seems reasonable to spend up to $25K on the cost of getting your $300K home rebuilt...
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Old 08-19-2007, 01:53 PM   #14
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As always, Justin and his ilk will side with the corporations over the humans.
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Old 08-19-2007, 02:05 PM   #15
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Remind me again why I should purchase a home to live in? (and pay big taxes for, and big insurance headaches?)
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Old 08-19-2007, 02:05 PM   #16
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As always, Justin and his ilk will side with the corporations over the humans.
Unwarranted, pointless and tasteless personal attack.

Feel free to question his facts or opinions but this forum generally won't put up with personal attacks.

I'm not a moderator so you don't need to consider yourself "warned" but do consider yourself informed.
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Old 08-19-2007, 03:43 PM   #17
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Another thing to consider: if your home is destroyed by <insert disaster du jour here>, the pile of rubble will have to be cleaned up and hauled away before rebuilding can commence. This is not an insignificant cost...
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Old 08-21-2007, 01:32 PM   #18
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As always, Justin and his ilk will side with the corporations over the humans.
You must have missed my penultimate paragraph from my post.

I'll quote it here so you won't inadvertently overlook it again.

"...I do hate the bastard insurance companies and give them as little money as possible... I assume that upon every interaction with them that they are trying to screw me. They are a necessary evil... My goal is to take as much money from them legally while giving them as little as is legally possible in return. I assume their goal is the same in regards to me."

I think my feelings about the insurance companies are pretty clear.
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Old 08-21-2007, 05:25 PM   #19
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I saw the dig on insurance companies in general. I do not dislike them, but I do need to be able to trust them... or at least the one I have a contract with.


Insurance is a wonderful invention to sell off risk.

The other part of the equation is having an ethical, competent, and helpful (concerned) agent... sometimes a rare thing to find.
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Old 08-21-2007, 06:41 PM   #20
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You must have missed my penultimate paragraph from my post.

I'll quote it here so you won't inadvertently overlook it again.

"...I do hate the bastard insurance companies and give them as little money as possible... I assume that upon every interaction with them that they are trying to screw me. They are a necessary evil... My goal is to take as much money from them legally while giving them as little as is legally possible in return. I assume their goal is the same in regards to me."

I think my feelings about the insurance companies are pretty clear.
I reread your earlier post in its entirety and I apologize for my comments.
It's just that sometimes the hypermarket environment we live in makes me lash out at the nearest target.
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