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Published on Aug 01, 2008 by Edgar Snyder

Ten Worst Insurance Companies in America: Part II

Insurance

According to the report published by the American Association for Justice, here are numbers ten through eight: 

10. Liberty Mutual

Like many other insurance companies, Liberty Mutual hired consulting firm McKinsey & Co. to help boost its bottom line. The McKinsey strategy is based on lowering amounts paid in claims, regardless of whether or not the claims are valid.

To accomplish this goal, Liberty Mutual assumed the deny, delay, defend strategy. It also began dropping policyholders nationwide. The company pulled out of many states, including hurricane-vulnerable Louisiana and Florida, and northern states such as Connecticut, Rhode Island, Maryland, Massachusetts, and much of New York.

The New York Times highlighted one of Liberty's victims:
James and Ann Gray of Long Island. The couple was "nonrenewed" by Liberty, despite the fact that they lived 12 miles from the coast and the only water damage they ever sustained resulted from an overflowing bathroom. In total, Liberty Mutual and its competitors have abandoned over 3 million people in the last few years.

9. Torchmark

For over 100 years, Torchmark has preyed upon low-income Southerners. The company and its subsidiaries have engaged in race-based underwriting, refusing insurance to non-English speakers, and intentional overcharging of premiums. These practices have resulted in a number of lawsuits from both regulators and policyholders.

In the mid-1980s, half of all Alabama residents who died had a burial policy from Torchmark. In 2000, a Florida court ordered the company to stop collecting premiums on the old burial policies because they had been sold for higher prices to black policyholders.

In 2003, Torchmark affiliate United American Insurance settled charges claiming that it had defrauded senior citizens in the sale of Medicare policies. A two-year investigation concluded that United American aggressively pressured hundreds of senior citizens into buying insurance that was more expensive and less comprehensive than what they already had, a practice that is illegal. Internal documents showed that company agents were encouraged pretend they were representing federal agencies or senior service centers.

8. UnitedHealth

UnitedHealth grew rapidly to become the country's largest health insurance company by premiums written. This growth came with a serious price tag. William McGuire, who became CEO in 1990, "streamlined" the company by cutting back on coverage he deemed unnecessary and by bargaining with doctors to reduce payments. Money that should have been spent on patient care was instead diverted to the company.

Much of it lined the pockets of McGuire, who also convinced the board of directors to allow him to choose when his stock options would be rewarded, essentially backdating them to make it appear as though they were issued on days when the prices were their lowest. This allowed McGuire to amass $1.6 billion in options in 15 years. The SEC investigated UnitedHealth's options granting system, which led to McGuire's dismissal as CEO and forced him to give back $620 million in stock gains and retirement compensation.

UnitedHealth's singular focus on profits has caused the company to sacrifice patient care for capital gain. State regulators have accused the provider of wrongfully denying claims, like when it refused the request for an enclosed bed to protect a four-year-old with an abnormally small head. In other cases, the company has delayed paying claims. So much so, in fact, that many physicians in South Carolina have stopped accepting UnitedHealth coverage and others are forcing patients to pay upfront. Additionally, the state Department of Health has prohibited UnitedHealthcare of New York from enrolling new members until it improves practices.

In my next post, I will reveal which companies captured spots seven through five.

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