Vulture Culture: Dirty Deals, Unpaid Claims, and the Coming Collapse of the Insurance Industry
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There are laws requiring that our homes and cars be insured, and we know it’s a good idea to insure our health and our lives as well. So we pay for our policies secure in the knowledge that if the unexpected happens, at least we won’t have to worry so much about where the money is going to come from.But the cost we’re truly paying may be far more dear than we’ve ever imagined. Plain and simple, the insurance industry is at the breaking point. Rampant, industry-wide corruption entwined with weak and inconsistent state regulations and federal indifference has led to a deluge of unpaid claims, leaving untold numbers of trusting consumers suddenly (and sometimes literally) out in the cold.Veteran attorney and insurance-industry observer Eric Gerst takes you on a tour of a mighty industry threatening to collapse under its own considerable weight. First, step into the offices of former New York State Attorney General Eliot Spitzer, where an anonymous letter materializes and blows the lid off a pervasive bid-rigging scheme being perpetrated by the world’s largest insurance broker and several of its client carriers.Next, Gerst cites sobering studies and his own eye-opening interviews with current and former officers with state insurance commissions and national consumer groups. The findings add up to a nightmare of regulatory lapses and abuses that directly affect both the individual policy holder and the stability of the industry as a whole. If, as Gerst suggests, insurance forms the backbone of our economy, the implications are grave indeed.Gerst pulls no punches in identifying, by name, the executives and companies who are front and center in this mega-scam. His “Rogue’s Gallery” reads like a list of Hollywood plot summaries: multi-billion-dollar bankruptcies that seemingly came from nowhere; fat-cat executives fleeing the country with millions in cash, (plus jewels and girlfriends for good measure); and greedy vultures who systematically prey upon the faith, needs, and misfortunes of their customers.Vulture Culture identifies twelve alarming trends, including the globalization of the industry, that threaten the ability of traditional state and national authorities to regain control. And Gerst outlines the discrepancies in state regulatory practice and the history of the legislation that gave states, not the federal government, control over “the business of insurance,” leading to 50 separate (and often conflicting) insurance “fiefdoms.”But is all hope lost? Amazingly, the answer may just be “no.” The new awareness of the depth and breadth of insurance fraud and other problems has spurred loud calls for federal oversight of the entire industry, and the well-publicized state crackdowns, of which New York’s was the first, have put brokers, insurers, and their executives on notice that the party is over. Gerst’s book not only diagnoses the disease, it also prescribes the concrete actions that must be taken in order to stop a recurrence of the recent past—and to avoid a very bleak future.In fact, Vulture Culture, for all its no-holds-barred revelations, is a powerful and positive advocate for change, offering practical solutions—including detailed sample legislation—designed to straighten out the insurance industry and protect the American consumer.
Introduction ixAcknowledgments xiiiThe CrisisThe Crisis: A Long Time Coming 3How the Industry Got Where It Is Today: A Rogues' Gallery 31How the Industry Got Where It Is Today: Unpaid Claims and the Storm After Hurricane Katrina 63How the Industry Got Where It Is Today: Foreign Takeovers, Unregulated Reinsurers, Insurer and Claimant Fraud 79The View from Outside: A Report Card on State Regulation 99Trends: The Next Decade 115The Public Uproar and a Crescendo of Distrust 151The SolutionFifty Nonuniform State Fiefdoms 173Winds of Change: How to Improve the Industry 195The Solution: UFOIL-A Two-Step Process of Consumerization and Federalization 219Index 233About the Author 239
