Friday, August 03, 2007

The Giant Insurance Fraud!

Bloomberg had a story about how insurance companies have been defrauding policyholders by underpaying on their claims, even when the claims are within coverage limits for their homeowners' insurance. Here's an excerpt:
Kevin Hazlett, a lawyer, sued Farmers Group after an April 2006 tornado struck his home in O'Fallon, Illinois. Farmers had offered to pay him $470,000 to rebuild the house. Royal Construction Inc., based in Collinsville, Illinois, estimated the cost at $1.1 million. Hazlett, 52, accepted a settlement for an undisclosed amount.

Bo Chessor, owner of Royal Construction, says he sees insurers refusing to pay coverage limits all the time. ``Most people just roll over and take it because they don't have the money to fight it,'' Chessor says. ``What the insurance companies are doing is purely robbery.''

It may be robbery, but it's rarely a crime. State insurance departments don't prosecute insurance companies, and the federal government has no oversight. The insurance industry wants to keep it that way.

I'm all for making a buck, but this is not capitalism, it's fraud! The only reason insurance companies get away with it is the $98 million they spent on lobbying last year. Hopefully, Sen Trent Lott (R-MO) will succeed in getting legislation passed to regulate the industry - he's pursuing this after the insurance companies tried to screw him over after Hurricane Katrina (he eventually settled his personal claim, but has seen first-hand the unscrupulous attitude the industry takes)

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