Letter to Attorneys General: Investigate Property Insurers’ Claims Handling Practices and Other Areas of Potential Misconduct
Dear Attorneys General,
In a single year, John and Jodi Phillip of Van Horne, Iowa dealt with an exceptional level of suffering. A derecho damaged their home and destroyed their business while the couple faced serious health challenges, including Jodi’s brain tumor and John’s stage four cancer. But for Jodi, the greatest stress was the “utter helplessness” she felt fighting with her property insurer for the payment of storm-related claims. Their insurer’s failure to pay for the full cost of recovery—Jodi estimates they are owed over $650,000—has left their business shuttered and home exposed to the elements.
John and Jodi are far from alone in feeling betrayed by their property insurance company and public frustration extends beyond the claims process. Richard Zimmel of Silver City, New Mexico told the New York Times that shortly following a large financial investment to fireproof his home, he received a non-renewal letter from his insurance company. The San Francisco Chronicle has reported on the homeowners, including Mike and Kendra Kubo of Santa Cruz, California, who are unable to rebuild following wildfires and other disasters due to low coverage limits set by their insurer. For the Kubos, State Farm set their coverage limit nearly $500,000 below the estimate they received to rebuild their property following a devastating wildfire. Although the Kubos reupped their insurance coverage shortly before the fire, State Farm wouldn’t cover the full cost of rebuilding their home.
Each of these stories represents an alarming pattern of insurance company behavior that is growing across the country. As extreme weather events become more frequent and severe, households are experiencing claims delays or nonpayments, policy nonrenewals, and revelations of inadequate coverage following disasters. Though insurance is intended to help households manage risk and avoid financial devastation in the event of a disaster, many insurers are failing to fulfil this role.
In July 2026, Oklahoma Attorney General Gentner Drummond filed a sweeping lawsuit against Allstate Corporation, alleging the company orchestrated a racketeering scheme to systematically underpay policyholders for extreme weather damage.[1] The complaint alleges that for at least five years, Allstate secretly imposed restrictive claims standards to match predetermined outcomes, stripped licensed adjusters of their authority, and relied on unlicensed reviewers to slash payouts despite marketing “full coverage” to homeowners. During this time, Allstate made record profits.
Allegations of claims mishandling are not limited to Allstate. The Oklahoma Attorney General filed a similar suit against State Farm earlier this year. The issues raised in the Oklahoma lawsuit also have implications for households across the country. In Illinois, the Attorney General has sued State Farm for concealing its business practices.[2] In California, regulators are actively investigating patterns of claim denials, underpayment, and bad-faith conduct, and seeking a fine against the insurance behemoth. Los Angeles County subsequently filed suit seeking full restitution for policyholders, and civil fines. In Florida, the House speaker launched an investigation into property insurance companies hiding billions of dollars in profits in affiliate companies, while claiming financial losses so they could argue for rate increases.
The scale of claims handling abuses by insurers is potentially extensive. A recent investigation by the Wall Street Journal found that the five largest home insurers failed to pay out on more than 44 percent of claims resolved last year. Separate analysis from Weiss Ratings shows that fifteen of the largest insurers closed more than half of all homeowner claims in 2025 with no payout whatsoever. This often proves highly profitable to the industry. The industry collectively takes in an extra $8.8 million in interest and investment income for each day homeowners insurance companies delay paying claims. However, it is devastating for policyholders. Families who paid premiums for years, sometimes decades, now find themselves without the coverage for which they paid.
Home insurance is an essential financial safety net for consumers, and rising costs are a key affordability concern. Systematic mishandling of claims threatens household finances, disaster recovery and, in turn, broader US financial stability. Without a well-functioning home insurance market, mortgage markets, local economies, and state and municipal government budgets are also imperiled.
As the impacts of climate change worsen—including severe, costly, and widespread disasters—the need for increased oversight of and accountability for claims handling and other insurance company practices grows as well. Despite the escalating impacts of climate change, the property and casualty insurance industry just recorded its most profitable underwriting year in more than two decades. In 2025, underwriting profits surged to $68.7 billion, and reported net income came in at over $150.5 billion. At the same time, policyholders and the public bear a growing share of climate change-related costs through double-digit premium hikes, coverage withdrawals, and underpayment of claims.
Additionally, insurance companies are spending millions lobbying for legislation that restricts consumers’ private right of action, making it harder for consumers to get what they are owed. These tort “reform” measures are marketed as cost-saving reforms, but their real purpose is to make it harder for consumers to hold companies accountable. There is no evidence that shows restricting consumers’ access to courts drives down premiums or benefits consumers. Studies do show, however, that these changes in states like Florida have led to insurers denying more claims while pocketing premiums.
This industry will not reform itself; it must be compelled to do so. Consumers need champions who will stand up for them against unethical and fraudulent insurer practices and ensure that companies face consequences for their lawbreaking.
Attorneys general are uniquely positioned to fulfill this role through civil litigation, criminal investigation, consumer protection enforcement, and the bully pulpit. State attorneys general should also not assume that action by state insurance departments alone will be sufficient to address potentially widespread insurance company malpractice. While insurance departments have primary regulatory authority, attorneys general have distinct and broad consumer protection authority that can be an effective complement to insurance department action [3] or serve as an antidote to slow or tepid action from commissioners.
We are calling on attorneys general to investigate the following potential patterns of misconduct:
- Claim underpayments, delays, and denials after disasters. Home insurance claims payouts should not be a coin flip.
- Misleading sales tactics and policy terms, particularly related to algorithms used to determine coverage limits. Homeowners should not find out after a total loss that their coverage estimate was inadequate.
- Patterns of cancellations and non-renewals across entire neighborhoods, particularly for homeowners who have recently invested in risk reduction. Zip codes shouldn’t become a proxy for actual risk.
- Collusion, price-fixing, and anti-competitive behavior. When carriers simultaneously raise rates, shrink coverage, and tighten standards, the possibility of coordinated conduct deserves scrutiny.
- Racial premium gaps paid by Black and Hispanic homeowners. A recent study finds that these homeowners pay substantially higher premiums even after accounting for various risk factors.
And we call on attorneys general to advise legislators to do the following:
- Reject legislation that strips consumers of their right to hold insurers accountable in court. The evidence is clear: restricting access to justice does not lower premiums; it immunizes bad actors.
- Protect policyholders from widespread misconduct when insurance department oversight proves insufficient.
The public is clamoring for action. A recent SurveyUSA poll released by Climate Power and the Insurance Fairness Project found that more than 80 percent of voters want their state elected officials to do more to reduce rising insurance premiums. This is a matter of basic fairness and contract enforcement. We stand ready to support these efforts and to work alongside attorneys general to hold this industry accountable.
Sincerely,
Public Citizen
American for Financial Reform
Center for Climate Integrity
Center for International Environmental Law (CIEL)
Connecticut Citizen Action Group
Consumer Action
Consumer Federation of America
Consumer Watchdog
Extreme Weather Survivors
Every Fire Survivor’s Network
For a Better Bayou
Green America
Greenlining Institute
Metropolitan Interfaith Council on Affordable Housing
Minnesota Interfaith Power & Light
National Community Reinvestment Coalition (NCRC)
Oregon Consumer Justice
Revolving Door Project
The American Policyholder Association
Unlocking America’s Future
Individual Signers
Dave Jones, Former Insurance Commissioner
[1] State ex rel. Drummond v. State Farm Fire & Cas. Co., No. CJ-2026-1066 (Okla. Dist. Ct. Cleveland Cty. filed June 24, 2026)
[2] Gillespie v. State Farm Fire & Cas. Co., No. 2025CH10454 (Ill. Cir. Ct. Cook Cty. filed Oct. 14, 2025)
[3] id.