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| Grewal Law, PLLC

Historically, insurance companies were an efficient way to spread the risk of loss among many people, all of whom pay premiums into the system and each of whom would be compensated for a covered loss. Until recently, this system worked reasonably well. In the mid-1990’s, however, Allstate and other insurance companies adopted a new model aimed at maximizing profits. Since that time, insurance profits have skyrocketed into multiple billions of dollars per year.

How have these huge corporations achieved such success in the depths of an economic recession? By punishing customers who insist on receiving fair compensation, while providing prompt service to those willing to accept woefully inadequate settlement offers. This model, initially advanced by consulting firm McKinsey & Company for their client Allstate, calls for delaying claim resolution to force consumers into a tough decision: either file an expensive and time-consuming lawsuit or settle the claim for a fraction of its actual value.

This so-called “Good Hands or Boxing Gloves” approach has resulted in enormous profits, but ruined countless lives. In addition, this hard-line stance taken by insurance companies is responsible for perhaps thousands of lawsuits that would have been unnecessary had the insurers simply paid fairly under the terms of their insurance agreement.

It’s time to stop letting insurance companies get away with anti-consumer practices. Contact your State Representative and State Senator and insist they start protecting people over profits.


  1. Gravatar for Avenger

    Everyone, including your profession (taken as a whole, there are some altruistic exceptions) works at maximizing profits. Look at the typical contingency fee agreement which takes it's fee off the gross recovery rather than the net recovery (unless the client objects upfront, which few are saavy enough to do).

    Think it's a small point ? Think again

    Gross recovery $1,000,000

    less contingency fee <$400,000>

    less expenses - <$250,000>

    Net to client: $350,000

    instead of

    Gross Recovery $1,000,000

    less expenses <250,000>

    Net Recovery $750,000

    less contingency fee <300,000>

    Net to client $450,000

    The above is not even an extreme example

  2. David Mittleman

    While I agree that almost all business endeavors strive to turn a profit, I have to disagree with your hypothetical fee agreement as being "typical," at least for personal injury cases. At my firm, costs (which you list at $250,000 - an extremely high figure) are deducted first. In many auto cases, the costs would be less than $3000 for a case that settles before trial, and perhaps between $5,000 and $10,000 for a case that reaches a jury. Then, a fee of 33% - which the Michigan Supreme court has held to be a reasonable fee - is taken from the remainder.

    More importantly, the client has the right to accept or reject any offer of settlement after he or she has been fully advised about the costs and their net take. If a case goes to trial, a jury will determine an award based on the evidence.

    As you can see, the legal profession is heavily regulated for client protection. The insurance industry was once this way, but corporate interests have gotten in the way.

Comments are closed.