‘Systematic fraud’ alleged in property/casualty claims practices

Two independent insurance claims adjusters and a U.S. Senator accused property/casualty insurance companies of directing adjusters to lower their claims estimates to reduce insurer payouts to homeowners – a practice described as “a pattern of systematic fraud.”

The Senate Homeland Security Committee’s Subcommittee on Disaster Management grilled two industry executives after listening to testimony from two policyholders whose homes were left uninhabitable after recent natural disasters and two adjusters who described how insurers pressure them to revise their reports to reduce the claims payout.

“Where do Americans turn after catastrophes like the ones we’ve experienced? They turn to their insurance companies because they pay premiums to those companies – it’s a contract,” said Sen. Josh Hawley, R-Mo., subcommittee chair. “But at the end of the day, insurers won’t pay what is due, what is required, what is just. This is a deliberate strategy to maximize profits.”

Natalia Migal, an Allstate policyholder from Sandy Springs, Ga., and Jacob Vertel, a State Farm policyholder from North Carolina, described how trees toppled onto their homes during Hurricane Helene in September, resulting in massive structural damage.

Migal said Allstate promptly assigned an adjuster to her claim, and his inspection took about five hours. “The adjuster was very detailed and thorough,” she said. “He confirmed this was a significant loss.”

She contacted several contractors to provide quotes to bring the house back to normal and she shared those quotes with Allstate. But she learned the adjuster was removed from her claim because Allstate felt the process was taking too long.

A second adjuster came to the house and following a two-hour inspection, Allstate made an initial offer of $46,000, which Migal said did not reflect the scope of the loss.

She then retained a public adjuster, who brought in a structural engineer, and determined that the loss totaled $149,000. After that sworn proof of loss was submitted, Allstate sent a third adjuster, who said he would submit the full estimate for approval. Migal said Allstate rejected the adjuster’s final submission, instructing him to remove numerous line items until the amount was reduced to a fraction of the original loss.

“When we needed Allstate the most, they failed us,” she said.

Nick Schroeder, property adjuster with Pilot Catastrophe Services, was the first adjuster to examine Migal’s home. Schroeder said he has prepared estimates for 17 different insurers in his career.

But shortly before Schroeder finished his estimate, he was taken off the case and the claim was moved to another adjuster, he said.

Schroeder testified that Allstate frequently rejected the estimates he submitted or returned them with requests for modifications that would reduce the insurer’s costs. “In my professional opinion, the claims handling at Allstate was aimed at preventing expense,” he said.

More reliance on third-party adjusters

Clifford Millikan, another adjuster with Pilot, said he has seen significant changes in Allstate’s claims process since 2020. He alleged that the insurer is relying more on third-party adjusters – who he described as “picture takers” – instead of licensed adjusters.

“This process confuses policyholders, who mistake picture takers with adjusters,” he said. “This process also increases the possibility of missing damage.”

Allstate has stripped all field adjusters of decision-making authority, Millikan alleged.

“In the overwhelming majority of cases, they have instructed us to make deletions,” he said. “It’s the reviewer’s decision – it’s final. If the adjuster resists, the claim goes to someone else.”

Vertel described his experience with State Farm after four trees fell on the roof of his house, allowing rainwater to pour into the structure. He said his first offer from State Farm wouldn’t even be enough to repair the roof, let alone the rest of the house. In addition, he claimed that State Farm refused to reimburse his family for living expenses they incurred as a result of the damage – stating that they believed the house was habitable even though the county had determined it was unsafe.

He said State Farm sent numerous adjusters to the house, and the most recent adjuster dismissed formal inspections made by contractors. After more than 120 days, the house is still untouched since the hurricane.

“We need State Farm to give us our lives back,” he said.

State Farm, Allstate deny lowballing claims

State Farm’s vice president of operations, Michael Keating, said his company “is hard at work on the ground so policyholders can return to their homes.”

Keating also denied that State Farm deliberately underpays claims.

“State Farm receives 30,000 claims every day. Behind every claim is a family or a business who needs our help. Our goal is to understand the scope of the damage and determine what we owe … listen carefully, show empathy and pay what is owed under the terms of the policy.”

The company sometimes works with independent adjusters to process a large volume of claims in a timely way, Keating said. “We require they are licensed and base their analysis on facts,” he said.

Allstate’s executive vice president and chief claims officer, Mike Fiato, disputed some of the details of Migal’s testimony. But he denied that Allstate was deliberately revising claims estimates downward.

“Allstate’s purpose is to serve our customers. We help our customers recover from life’s toughest moments. We say that our customer’s worst day needs to be our best day,” he said.

But Hawley ripped into that statement, saying, “Your customer’s worst day is your biggest profit day.”

“There is a pattern of systematic fraud here.”

Allstate released a statement following the hearing, stating:

“Allstate’s team of 23,000 claims professionals serve 8.4 million customer claims each year. In 2024, the company provided over $37 billion to customers, including $4.6 billion tied to 132 catastrophes," Fiato said. "Allstate mobilizes thousands of people after disasters to serve customers by organizing shelter, providing clothing and distributing money to help them begin rebuilding their lives. Allstate customers impacted by January’s California wildfires have received $945 million.”

The statement added: "One in 10 American households depend on Allstate to protect one of their most valuable assets with affordable, simple and connected insurance. Over the last five years, Allstate has paid over $20 billion to help customers rebuild following severe weather events."

A whistleblower says otherwise

Hawley cited a Pilot whistleblower’s claim that Allstate created an internal review team to keep claims as low as possible.

“It sounds to me like your company is running a racket and you’re making more money than ever,” he said.

Fiato said Allstate adjusters “are given a certain amount of authority.”

“When they submit a claim for review, it goes to a senior tech reviewer who will look at supporting documentation,” he said. “There is also a tech review of whether the adjuster estimated according to the standards we set forth.”

Fiato disagreed that there is a pattern of reducing claims estimate. He cited data that showed 27% of estimates were reduced after a review and 9% were increased. The rest remained unchanged.

But Hawley wasn’t buying the insurers’ assertions that they are deliberately reducing claims to increase profits.

“In times of crisis, these good folks look to you. And more and more, they are disappointed. People in this country deserve better, and, with the profits you are making, I think you can afford it.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].