05/20/2025
This is NOT new from just a 2024 Hurricane Helene. Though a challenge to find now because it is out of print now, there is a book by a (New Mexico?) attorney called “FROM GOOD HANDS TO BOXING GLOVES” that has both a layperson edition as well as a much more detailed Trial Guides edition available in law libraries.
Whether homeowners policies or automobile policies, “deny, delay, defend” as a standard operating procedure for processing claims (read or watch John Grisham’s “The Rainmaker.) was developed after Sears spun off their other companies to focus on retail.
So when the execs at All-State were no longer accountable to their umbrella company, they hired some consultants to create strategies to increase profitability. You may not hire consultants often so may not be familiar with McKinzie & Co., but their most notorious client following their instructions to the letter might ring a bell… Enron!
For centuries before then, it was a reliable rule of thumb that 70% of premiums paid in were generally paid out in legit claims. The remaining 30% was where overhead and profit were traditionally derived.
What’d McKinzie advise All-State to do? Quit paying claims! Whether Automobile crash claims or Hurricane Katrina, employ that 3-D claims process. Employ it even to the point where if sued (by their own customer!), be willing to spend much more than the legit claim in defending the case so as to discourage future claims and lawsuits.
Simultaneously, change the laws and rules. Engage in policymaking. “$upport” favorable legislators, and move your own industry leaders into positions of influence and authorities so that your foxes are guarding the henhouses.
No, this is not new. All-State captured so much market share that others had to adopt similar practices just to remain competitive.
And it does not stop there. A month ago, the Texas Senate passed SB30. Earlier this month the companion bill in the Texas House was heard in committee (HB 4806). That one bill took up the entire day of the Civil Jurisprudence and Judiciary Committee.
In the first few minutes of testimony, though, a little nugget jumped out that few likely caught if they weren’t familiar with the old rule of thumb. A witness testified that now only 62% of premiums are paid back out in claims. A 1-2% variation was common over centuries, but an 8% variance is astronomical.
If you wonder why your PCP’s who’ve cared for your family for decades won’t let their front desk make you an appt if you mention a car crash, this is why. The insurance industry destroyed decent options for work injury treatment 20+ years ago in Texas as I was getting out of school by changing laws. And they continue to attempt to move goalposts in property and casualty claims now.
It is critical you contact members of the Texas House Committee on Judiciary and Civil Jurisprudence members as well as your own Representative to direct them to vote NO TO HB 4806!
