Drum roll please…. The number 1 worst insurance company, according to a 2008 study published by the American Association for Justice, is:

1. Allstate

Known for its insensitive attitude of putting profits before its policyholders, Allstate is the epitome of insurance industry greed. Despite its highly publicized "good hands" approach, Allstate frequently employs an aggressive "boxing gloves" policy against its customers, aiming to delay and deny claims as often as possible.

This policy was initiated by the infamous consulting giant McKinsey & Co. in the mid-1990s. The firm suggested that Allstate focus on decreasing the amount of money it paid in claims, whether or not the claims were legitimate. After adopting this suggestion, Allstate decided that making a profit would be its number one priority. It's no wonder that complaints filed against Allstate are much higher than most other insurance companies, according to the National Association of Insurance Commissioners.

Allstate's "boxing gloves" strategy places its customers at next to no importance. Over the last ten years, the amount Allstate paid out in claims has considerably decreased, from 79 percent in 1996 to 58 percent in 2006. As the company paid less in claims, its profits grew to $4.6 billion in 2007, more than double what it earned in the 1990s.

Even though the company is inundated with cash, it consistently neglects its customers. After Hurricane Katrina, for example, Allstate tried repeatedly to drop 5,000 policyholders for supposedly not showing intent to fix their properties. In Florida, Allstate has dropped over 400,000 customers since 2004, and the company got in trouble because it appeared to be only renewing the customers who had multiple lines of Allstate coverage. The provider was investigated in New York for the same reason and was forced to discontinue the practice.

All of the companies in this list from the association's study are examples of why the insurance industry is in dire need of reform. Allstate's CEO summed it up perfectly when he expressed the company's mission: "our obligation is to earn a return for our shareholders." Indeed, too many times we find insurance providers looking out for their own self-interests, doing all they can to increase profits and forgetting their ethical and legal responsibilities to customers.

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4. State Farm

In August 2005, Hurricane Katrina ripped through the north-central Gulf Coast, killing nearly 1,600 people and leaving thousands homeless. The aftermath of the catastrophic natural disaster revealed State Farm at its worst. Notorious for it's deny and delay tactics, the insurance company did almost anything to avoid paying claims, including changing engineering reports concerning Hurricane damage. The Nguyen family experienced this firsthand.

The Nguyens', of Mississippi, lost their home in Hurricane Katrina. Although State Farm's own engineers reported that the damage to their home was caused by wind – even citing eyewitnesses who saw another house lifted up by the wind and thrown into the Nguyen home – the company denied the family's claims. Instead, State Farm hired another engineering firm to draw a different conclusion, saying the damage was caused by flooding.

The unfortunate circumstances of the Nguyen family show State Farm's disregard for its customers. In April 2007, State Farm agreed to reevaluate more than 3,000 Hurricane Katrina claims, and after a few months, the company paid nearly $30 million in additional settlements.

3. AIG

AIG has a reputation for being one of the most ruthless claims fighters in the insurance industry. Former AIG claims supervisors have stated that the company uses countless deny and delay methods, including postponing payment of attorney fees until they were a year old, locking checks in a safe until claimants complained, and regularly challenging claimants for years in court over routine claims.

The company's claims-fighting tactics were apparent in 1988, when an AIG-insured Safeway burned down in Richmond, Virginia. Nearby residents who were affected by the fire confronted the supermarket with damage claims. But AIG refused the claims, saying the damage was not caused by the fire, but by smoke, which was not covered because it was a form of air pollution.

AIG is also infamous for its callous opportunism. After Hurricane Andrew swept through Florida in 1992, AIG Executive Vice President J.W. Greenberg sent a memo to the entire company which said, "This is an opportunity to get price increases now." AIG exhibited a similar opportunistic attitude immediately following the tragic terrorist attacks on September 11. CEO Maurice Greenberg said he believed that "opportunities for his 82-year-old company have never been better."

2. Unum

Unum is one of the country's largest disability insurers, but the company has not exactly lived up to its customers' expectations. Known for unjustly denying and delaying claims, Unum's actions have hurt many of its policyholders.

When Potter developed multiple sclerosis, she filed a disability claim with Unum. However, the insurance company refused the claim and told Potter that her conditions were "self-reported." In response, Potter's physician sent a series of memos to Unum testifying to her problems. For three years, the insurance company continued to deny her claim, despite appeals from Potter's employer and a confirmation by the Social Security Administration that she was totally disabled. Unum finally agreed to pay the claim when Potter hired an attorney.

Unum is infamous for its poor claims-handling policies. In fact, former employees of the company have stated on record that Unum instructed them to refuse claims in order to meet cost-savings goals. It is clear that instead of focusing on the needs of their policyholders, Unum is far more concerned with its own financial interests.

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7. Farmers

Based on satisfaction surveys from JD Powers and Consumer Reports, Farmers Insurance Group consistently ranks among the worst insurance companies for homeowners and for auto insurance. The best example of Farmers' attitude toward its policyholders is probably that of Ethel Adams.

Adams, a 60-year-old Washington State resident, was involved in a multi-vehicle accident that left her in a coma for nine days. She suffered devastating injuries and was confined to a wheelchair. Despite the severity of her injuries, Farmers denied Ms. Adams' claim, saying that because the driver at fault had acted in a moment of intentional road rage, the crash was not an accident. The claim denial caused an outcry, and Farmers only reversed its stance when the Washington State Insurance Commissioner threatened the company with legal action.

This case is emblematic of Farmers approach of putting profits ahead of customers. The company offers incentives, like gift cards and pizza parties, to adjusters who meet goals like giving low payments and convincing claimants not to retain an attorney. Furthermore, employees' raises and performance reviews are also decided based upon their ability to reach low payment goals.

6. WellPoint

In 2004, Indianapolis-based Anthem and Thousand Oaks merged with California-based WellPoint, creating the nation's largest health insurer. The deal was met with criticism from consumers, doctors, pension managers, and state regulators, who feared the merger would create a monopoly that would abuse the marketplace. The deal was also accused of providing excessive compensation to executives. WellPoint's then-Chairman and CEO, Leonard Schaffer, received almost $82 million in severance, pension, and stock options.

California has been aggressively campaigning to stop WellPoint from practices the state believes are illegal. In March 2007, the state's Department of Managed Health Care fined Blue Cross of California and WellPoint, its parent company, $1 million after an investigation revealed that the insurance provider routinely canceled the individual health policies of pregnant women and chronically ill patients. This practice, called recission, is illegal in California.

During the investigation, regulators found more than 1,200 recission and claims policy violations by the company. These violations included improper recissions, failure to pay claims on a timely basis, failure to provide necessary information when denying a claim, mishandling member appeals, and failure to pay interest on claims. Despite fines and warnings from the state, the company did not change its policies, and is now expected to face up to $1 billion in penalties. Other states that have filed claims against WellPoint and its subsidiaries include Nevada, Colorado, and Kentucky.

5. Conseco

Conseco's policyholders are some of the most vulnerable in the country. The provider sells long-term care policies, mainly to the elderly, as a guarantee that their customers will be taken care of at the end of their lives.

Unfortunately, Conseco uses the delay and deny tactic in the hopes that policyholders will not live to see their valid claims paid. Mary Beth Senkewicz, a former senior executive at the National Association of Insurance Commissioners (NAIC) said of the long-term care insurance industry, "They'll do anything to avoid paying, because if they wait long enough, they know the policyholders will die."

Even employees of Conseco and its subsidiaries have spoken out against the company. In 2006, claims adjuster Teresa Carbonel said in a deposition that she was forbidden from calling physicians or nursing homes to request missing paperwork before she denied a claim. Jose Torres, another employee, said that he was told to withhold payment on claims until policyholders submitted paperwork not even required under their policies. This past May, Conseco brokered a settlement with the NAIC over its abuses. The terms included fines totaling $2.3 million and a promise that Conseco will invest $26 million in its claims processing system.

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According to the report published by the American Association for Justice, here are numbers ten through eight: 

10. Liberty Mutual

Like many other insurance companies, Liberty Mutual hired consulting firm McKinsey & Co. to help boost its bottom line. The McKinsey strategy is based on lowering amounts paid in claims, regardless of whether or not the claims are valid.

To accomplish this goal, Liberty Mutual assumed the deny, delay, defend strategy. It also began dropping policyholders nationwide. The company pulled out of many states, including hurricane-vulnerable Louisiana and Florida, and northern states such as Connecticut, Rhode Island, Maryland, Massachusetts, and much of New York.

The New York Times highlighted one of Liberty's victims:  James and Ann Gray of Long Island. The couple was "nonrenewed" by Liberty, despite the fact that they lived 12 miles from the coast and the only water damage they ever sustained resulted from an overflowing bathroom. In total, Liberty Mutual and its competitors have abandoned over 3 million people in the last few years.

9. Torchmark

For over 100 years, Torchmark has preyed upon low-income Southerners. The company and its subsidiaries have engaged in race-based underwriting, refusing insurance to non-English speakers, and intentional overcharging of premiums. These practices have resulted in a number of lawsuits from both regulators and policyholders.

In the mid-1980s, half of all Alabama residents who died had a burial policy from Torchmark. In 2000, a Florida court ordered the company to stop collecting premiums on the old burial policies because they had been sold for higher prices to black policyholders.

In 2003, Torchmark affiliate United American Insurance settled charges claiming that it had defrauded senior citizens in the sale of Medicare policies. A two-year investigation concluded that United American aggressively pressured hundreds of senior citizens into buying insurance that was more expensive and less comprehensive than what they already had, a practice that is illegal. Internal documents showed that company agents were encouraged pretend they were representing federal agencies or senior service centers.

8. UnitedHealth

UnitedHealth grew rapidly to become the country's largest health insurance company by premiums written. This growth came with a serious price tag. William McGuire, who became CEO in 1990, "streamlined" the company by cutting back on coverage he deemed unnecessary and by bargaining with doctors to reduce payments. Money that should have been spent on patient care was instead diverted to the company.

Much of it lined the pockets of McGuire, who also convinced the board of directors to allow him to choose when his stock options would be rewarded, essentially backdating them to make it appear as though they were issued on days when the prices were their lowest. This allowed McGuire to amass $1.6 billion in options in 15 years. The SEC investigated UnitedHealth's options granting system, which led to McGuire's dismissal as CEO and forced him to give back $620 million in stock gains and retirement compensation.

UnitedHealth's singular focus on profits has caused the company to sacrifice patient care for capital gain. State regulators have accused the provider of wrongfully denying claims, like when it refused the request for an enclosed bed to protect a four-year-old with an abnormally small head. In other cases, the company has delayed paying claims. So much so, in fact, that many physicians in South Carolina have stopped accepting UnitedHealth coverage and others are forcing patients to pay upfront. Additionally, the state Department of Health has prohibited UnitedHealthcare of New York from enrolling new members until it improves practices.

In my next post, I will reveal which companies captured spots seven through five.

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The American Association for Justice recently published a report called "The Ten Worst Insurance Companies in America: How They Raise Premiums, Deny Claims, and Refuse Insurance to Those Who Need It Most." The findings of this report would probably shock many people, but for years my law firm has seen first-hand how insurance companies try to take advantage of people during their most difficult times.

There are two common themes that emerge in this report. The first is that insurance companies value profits over policyholders. Simply put, the companies have found that they make more money when they don't pay out claims. The second similarity among the companies is how they avoid paying these claims: deny, delay, and defend. They deny claims, no matter how valid they are. They delay the claims process, hoping that claimants will give up. They defend themselves, doing anything to fight a lawsuit.

The information in this report is very important, because it exposes the unethical practices embraced by the insurance companies, and it can also help those dealing with insurance companies protect themselves. In my upcoming posts I will give you detailed information about the insurance companies on the association's "Ten Worst" list.

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There’s something we’ve been saying for years at my law firm – if you’ve been injured in an accident, don’t settle with the insurance company before you talk to a lawyer. These corporate insurance providers will always try to settle low, giving only a fraction of what it takes to cover lost wages, medical expenses, and repair costs.

I recently read a blog post on CNN that explains this perfectly. A woman with $25,000 in hospital bills and lost wages was only offered $15,000 by her insurance company. What about the other $10,000? Why should she have to cover that out of her pocket when she was the one who was injured? She’s the one who pays the insurance company every single month, not the other way around.

The insurance companies have a strategy – "the three Ds: deny, delay, and defend." That means, they’ll fight for as long as they can to give you as little compensation as possible. They rely on the average consumer to be uneducated about their rights as an insurance customer. Remember, never sign any papers or record a statement with the insurance company before you talk to a lawyer. You could sign away your rights forever.

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