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Tuesday, January 8, 2013

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Opinion: Insurance Companies – No Good Deed Goes Unpunished (…or, “You Gotta be ****ing Kidding...”

One of the reasons that I began writing is because as an information and news junkie, I would often come across items on the newswire that seemed to garner very little coverage. What’s more, I simply cannot stand the way people tend to view news items through the prisms of their ideological beliefs. In objectively learning about what goes on around us, I find the old adage to be very true; to be forewarned is to be forearmed. Take insurance companies for example. I think most people have a love-hate relationship with them. They’re a necessary evil, but given some of their practices and policies, it’s hard to understand why their favorability rankings in the court of public opinion don’t find them sandwiched in between those of a child molester and dung beetle (personally, if it were for the law, I probably wouldn’t carry insurance on my automobile). Some insurance companies seem to go out of their way to prove how much they can rub the public (and their clients) the wrong way.
Remember the American International Group, better known as AIG? A few years ago (4 to be exact), the multibillion dollar insurance and financial services company was headline news. The reason? AIG was one of the “too-big-to-fail” financial institutions leading the near-collapse of the American (and world) financial markets due to then-commonplace excessive risk-taking with mortgage-backed securities that it had insured through credit-default swaps. On the brink of collapse due to decisions it made, AIG received a courtesy-of-taxpayers government bailout in the form of loans to the tune of some $180 billion plus dollars…at a little-more-than 14% rate of interests. AIG made news the following year when it announced that it had planned to pay executives—the same “best and brightest” that had been at the helm when the company nearly ran itself into the ground—bonuses totaling over $160 million in the wake of having received government money (as an aside note, it was later reported that Democratic Senator Christopher Dodd of Connecticut had received $160,000 from employees of AIG, who amended the bailout legislation to allow the AIG bonuses).
Well, AIG is in the news once again. If you haven’t heard, the company, having just finished paying off the government last month, is seriously considering suing the federal government over the effects of the low-interest loans on its shareholders. Yes, you read right. AIG is suing the same government which rescued it out collapse! On Wednesday of this week, the company’s board of directors will discuss and vote on whether it will join a 25$ billion shareholders’ lawsuit against the government. At point is not the fact that the bailout was not needed in order to save the company, but that lawsuit

contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal’s high interest rates and the funneling of billions to the insurer’s Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for “public use, without just compensation" ("Rescued by a Bailout, A.I.G. May Sue Its Savior").

And as AIG contemplates whether or not to bite the hand that fed it in order to satisfy its stockholders, millions of Americans haven't been reimbursed one cent for their contribution to the collective billions they’ve lost in home values, investments, and retirement savings linked to the same industry practices which nearly drove the country’s market economy into the toilet. When companies exhibit such audacity, it’s hard to believe that there are some Americans who can defend unregulated market and/or company practices with such a straight faced blind devotion to treat-the-consumer-anyway-we-want market economics.
But when it comes to the insurance industry, AIG does exist in a vacuum when it comes to favoring shareholders over clients and customers. As I was watching the news the other day (where my inspiration came for this piece in fact), I happened across a piece spotlighting a Staten Island, New York couple who found out the hard way how shady some insurance companies are.
Back in October, Dominic and Sheila Traina lost their home to super storm Sandy. Luckily, the Trainas had evacuated their home prior to the arrival of the storm. But a neighbor who had stayed behind told the couple that the wind from the storm had blown their roof off their 2-story home. However, their insurer of record, Allstate, has alleged that the damage to the home was due to the storm’s tidal surge. In other words, Allstate says that flooding caused the damage. Instead of reimbursing the Trainas for the full loss of their home, the insurance company offered $10,000…which the elderly couple has rejected in lieu of hiring an attorney and fighting to receive full compensation under their policy. However, Allstate has stated that it encourages “our customers to consider flood insurance to protect themselves in ways that would not be covered under a homeowner's policy.”
In a damned-if-you-do-damned-if-you-don’t twist to the story, the couple said they previously had flood insurance, provided by the U.S. government's National Flood Insurance Program, but that their payments proved to be more than the reimbursement amounts they received for previous incidents, so they cancelled that particular coverage (which is not a good idea if you live on a flood-prone plain. If one chooses to reside in area where nature tends to act a bit fickle, then it behooves there individuals to purchase the appropriate insurance coverage).
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But in the Trainas case, the insurance company decided (I assume inadvertently) to add insult to injury; the company has used the couple’s damaged home in one of its television spots. In learning about what the Trainas were going through in New York with their insurance company, the logical part of myself considered the possibility that what that couple went through in the wake of the disaster was an aberration…a single instance of poor planning on the part of insurance policy holders.
But I found another policy holder in the Sandy-devastated region of the Northeast was treated with similar apparent contempt by the same insurance company, Allstate. After homeowner Jason Crea's house was totaled in Hurricane Sandy, he was paid the grand sum of $37.74 after the cost of the $1,000 deductable was factored in for his losses. In protest of the paltry sum offered to him by Allstate, he created a sign in an effort to shame the company into reconsidering its settlement.
According to the home’s owner,

When I bought the contents policy, I explained to [Allstate] that I have a lot of expensive stuff in the basement. They just smiled and took my money. The thing they didn't bother mentioning, and what was in the fine print, is that the basement isn't considered a room in the house (“Sandy Homeowner Gets $37.74 in Insurance for Destroyed Home”)

The bottom line is that the contents of Crea’s home were not covered by his policy. In all fairness, Crea should have read his policy more carefully…after all, Allstate is a business whose primary goal is a profit motive. But in taking the money after he had given the insurance agent the verbal caveat, the company appears to have misrepresented the policy holder’s policy. In fact, if you performed an internet search, using the name of your insurance company followed by the word, “sucks” (e.g., “_________sucks”), it would become apparent that there are far more dissatisfied people when it comes to insurance companies than there are people who are content, whether the policy is one covering health, property, or automobiles (although a few of the instances seemed to be more griping than not, many of those sample grievances I read appeared to have an air of legitimacy.
In all the recent public discourse about how certain politicians “hate business,” how companies “are people” (for the sake of applying the law), and about the “contribution” of “job creators” to the greater good, people on any side of these arguments tend to forget that in the end, businesses are not about creating jobs, creating customer satisfaction (at least not beyond that required to maintain a continual flow of customers), or even about promoting Free Market values. Insurance companies like AIG and Allstate are just like all businesses...they are all about maximizing profits, while minimizing losses. If your family benefits economically along the way of this regime, that’s fine and dandy. However, that is not their primary purpose…their interests are strictly self-serving and motivated by economics, not gallantry. Insurance companies may have their benefits, but they are every bit as self-serving as any other industry. Unfortunately, many of us don’t take notice of this reality until the moment we expect (insurance or any other) companies to treat us like “fellow human beings” (remember, companies are “people” under the law) when it comes our needs and/or interests.  And it's only the extremely rare company is above biting the hand that feeds them.

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