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Published on Aug 07, 2008 by Edgar Snyder

Ten Worst Insurance Companies in America: Part III

Worst Insurance Companies

7. Farmers

Based on satisfaction surveys from JD Powers and Consumer Reports, Farmers Insurance Group consistently ranks among the worst insurance companies for homeowners and for auto insurance. The best example of Farmers' attitude toward its policyholders is probably that of Ethel Adams.

Adams, a 60-year-old Washington State resident, was involved in a multi-vehicle accident that left her in a coma for nine days. She suffered devastating injuries and was confined to a wheelchair. Despite the severity of her injuries, Farmers denied Ms. Adams' claim, saying that because the driver at fault had acted in a moment of intentional road rage, the crash was not an accident. The claim denial caused an outcry, and Farmers only reversed its stance when the Washington State Insurance Commissioner threatened the company with legal action.

This case is emblematic of Farmers approach of putting profits ahead of customers. The company offers incentives, like gift cards and pizza parties, to adjusters who meet goals like giving low payments and convincing claimants not to retain an attorney. Furthermore, employees' raises and performance reviews are also decided based upon their ability to reach low payment goals.

6. WellPoint

In 2004, Indianapolis-based Anthem and Thousand Oaks merged with California-based WellPoint, creating the nation's largest health insurer. The deal was met with criticism from consumers, doctors, pension managers, and state regulators, who feared the merger would create a monopoly that would abuse the marketplace. The deal was also accused of providing excessive compensation to executives. WellPoint's then-Chairman and CEO, Leonard Schaffer, received almost $82 million in severance, pension, and stock options.

California has been aggressively campaigning to stop WellPoint from practices the state believes are illegal. In March 2007, the state's Department of Managed Health Care fined Blue Cross of California and WellPoint, its parent company, $1 million after an investigation revealed that the insurance provider routinely canceled the individual health policies of pregnant women and chronically ill patients. This practice, called recission, is illegal in California.

During the investigation, regulators found more than 1,200 recission and claims policy violations by the company. These violations included improper recissions, failure to pay claims on a timely basis, failure to provide necessary information when denying a claim, mishandling member appeals, and failure to pay interest on claims. Despite fines and warnings from the state, the company did not change its policies, and is now expected to face up to $1 billion in penalties. Other states that have filed claims against WellPoint and its subsidiaries include Nevada, Colorado, and Kentucky.

5. Conseco

Conseco's policyholders are some of the most vulnerable in the country. The provider sells long-term care policies, mainly to the elderly, as a guarantee that their customers will be taken care of at the end of their lives.

Unfortunately, Conseco uses the delay and deny tactic in the hopes that policyholders will not live to see their valid claims paid. Mary Beth Senkewicz, a former senior executive at the National Association of Insurance Commissioners (NAIC) said of the long-term care insurance industry, "They'll do anything to avoid paying, because if they wait long enough, they know the policyholders will die."

Even employees of Conseco and its subsidiaries have spoken out against the company. In 2006, claims adjuster Teresa Carbonel said in a deposition that she was forbidden from calling physicians or nursing homes to request missing paperwork before she denied a claim. Jose Torres, another employee, said that he was told to withhold payment on claims until policyholders submitted paperwork not even required under their policies. This past May, Conseco brokered a settlement with the NAIC over its abuses. The terms included fines totaling $2.3 million and a promise that Conseco will invest $26 million in its claims processing system.

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