When Insurance Companies Gaslight Us, Attorneys General Need to Investigate
'You Can See Everything' might as well have been about your home insurance policy
By Rick Morris
The new movie, You Can See Everything, showed me just how much reality is up for grabs when billions are at stake. Is Elizabeth Holmes a culprit, a victim, a pawn, or a mastermind? Was Theranos destined to be the great fraud of the 2010s, or was the potential for a medical breakthrough prematurely shuttered?
My mind was settled before watching the movie. While I watched, I felt like Nathan Fielder, confused in the emotional tumble of the San Diego bungalow, unsure of which way was up.
If you’ve ever lived through a disaster, your experience with home insurance probably felt the same way. Your adjuster seemed to be living in a different reality. Your contract suddenly seemed to mean different things than when you first signed. Your claim is delayed, downsized, and denied in a bureaucratic maze that would have Kafka at a loss for words.
Today the Financial Times reported that the property insurance industry may be manipulating our reality on a stage that dwarfs Holmes. The preeminent news organization reported that insiders say the insurance industry is pressuring modelers to “downplay climate dangers” in order to sell more policies. A legal opinion shared with UK regulators calls the allegations “exceptionally serious.”
The insurance industry is pushing modelers to lower their climate risk numbers so policies can still be sold. Read that again: the real climate risk is now so high that the honest number won’t sell, at least, not as quickly or widely enough to meet industry profitability targets. Insiders say some of this risk is already locked in, and with greenhouse gas emissions still climbing, the risk is only going to get worse.
Instead of creating a long-term plan, the industry is hiding the truth.
So what happens if the industry continues on this path? According to the whistleblowers, the plan is to raise rates, restrict coverage, and withdraw from communities before disasters can wipe out industry profits. For you and me, that means we will continue to pay insurance companies (either directly or via the rent we pay landlords who pay insurers) only to be left without a safety net when insurers suddenly withdraw from our community before the inevitable disasters strike.
Actuaries aren’t the only ones pressured to fudge the numbers. If you still happen to hold an insurance policy when a disaster hits, adjusters, who determine how a claim is paid out, may be pressured by insurance companies to lowball consumers. Deny, delay, and defend is the industry playbook.
Here’s what should happen instead. First, insurance companies need to be barred from making climate change worse. Currently, insurance companies act as key financiers of the fossil fuel industry. The insurance industry even went to bat for oil and gas companies at the Supreme Court, arguing that polluters shouldn’t be on the hook for climate damages. In this upside down world, insurance companies are arguing for immunity for the very culprits they should be suing to cover damages from climate disasters.
Second, insurance companies need to pay up. Investing in resilience and mitigation efforts (read: fortified roofs, wildfire resistance, community flood mitigation) avoids $13 in damages for every $1 spent. These investments benefit the insurance companies via avoided claims, but insurers have dragged their feet when states seek insurance industry dollars to fund resilience programs. Rather, the industry prefers to make historic profits on its financial investments, which incentivizes the industry to delay claims to the tune of $8 million each day, or to deny them outright rather than invest in the communities they insure.
Thankfully, policymakers are starting to take notice:
- Oklahoma Attorney General Gentner Drummond filed sweeping lawsuits against Allstate Corporation and State Farm, alleging the companies orchestrated a racketeering scheme to systematically underpay policyholders for extreme weather damage.
- California regulators are actively investigating patterns of claim denials, underpayment, and bad-faith conduct, and seeking a fine against State Farm.
- Los Angeles County subsequently filed suit seeking full restitution for policyholders and civil fines.
- The Illinois Attorney General has sued State Farm for refusing to provide regulators with data it is legally required to hand over.
- The Florida House speaker launched an investigation into property insurance companies allegedly hiding billions of dollars in profits in affiliate companies, while claiming financial losses so they could argue for rate increases.
We can’t let insurance companies get away with it. Our reality is not up for grabs. Insurance companies can’t downplay the risks now and leave the public holding the bag when the risks of climate change materialize.
That’s why Public Citizen and 19 organizations called on state attorneys general to investigate property insurers’ claims handling practices and other areas of potential misconduct. Our letter addressed all fifty state attorneys general to urge their offices to reject attempts to strip consumers of their rights to hold insurers accountable in court and to protect policyholders from widespread misconduct when insurance department oversight proves insufficient.
If attorneys general don’t vigorously protect consumers, property insurance could become little more than an open racket on their constituents.