Insurers: Good Neighbors or "Money Vultures"?

By Mary E. Alexander & Lynn R. Laufenberg

If you’re like most people, your knowledge of the insurance industry comes from personal experience. You’re familiar with the basics of buying a policy and making a claim. And chances are you’re aware that rates are rising because you’re being asked to pay more for the same coverage.

But how much do you really know about the companies that cash your premium checks? In television ads, insurers portray themselves as caring corporations that help protect your family in a crisis. But a new report called “The Money Vultures” suggests that image is far from the truth.

Although there hasn’t been an insurance scandal on par with Enron or WorldCom, the industry is filled with shady practices, phony accounting and outright fraud against consumers, according to the January 2003 report by the Center for Justice & Democracy (CJ&D), a public-interest group based in New York.

At the same time, insurance companies spend millions to gain political influence in Washington, D.C., and reward their top executives with annual salaries as high as $6.8 million, the CJ&D report found.

The companies with blemished records are some of the biggest and best known in the business. For example, the report found:

Blue Cross/Blue Shield companies “have a long history of defrauding the U.S. government” and consumers, with violations that include falsifying Medicare reports, lying to federal auditors, destroying documents, mishandling claims, and overcharging customers. Blue Cross/Blue Shield companies have paid hundreds of millions of dollars in criminal fines and civil settlements since 1995.
In 1996, a 30-state task force found that agents for Prudential had engaged in deceptive sales schemes throughout the United States. Insurance regulators in Florida detailed how Prudential trained its agents to defraud customers, specifically targeting the elderly. The company paid millions in fines and repaid 10.7 million policyholders.
CJ&D’s report found that some of the worst wrongdoers also spend sizable amounts on political contributions. Their goal? Special treatment from politicians in Washington. Overall, the insurance industry has made nearly $70 million in federal campaign contributions since the late 1990s, according to statistics from the non-partisan Center for Responsive Politics.

CJ&D’s report identified the “Top 10 Insurance Money Vultures” — companies that each made more than $1 million in campaign contributions in the past few years and also had “either run-ins with the law or [had] been sued by defrauded policyholders.”

Along with Blue Cross/Blue Shield and Prudential, the “Top 10″ include AFLAC, American International Group, American Financial Group, MetLife, Cigna, MassMutual, New York Life and United Services Automobile Association Group.

The report warns that the insurance industry already is seeing its money pay off in Washington. In November, Congress passed a terrorism insurance bill that bails out the insurance industry at taxpayer expense in case of another terrorist attack. USA Today criticized the bill for putting “taxpayers at risk while exposing special interests’ willingness to exploit 9/11 for their own gain.”

CJ&D’s report concludes: “Despite being one of the most detested industries and worst corporate citizens in the country, insurance companies have bought access to the White House and to Congress, and insurers are just beginning to see their contributions pay off.”