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July 2007 Archives

Disability claims-handling systems put profit before disability benefits

Under traditional principles of in­surance law, insurers are supposed to give as much consideration to the inter­ests of their policyholders as they do to their profits. However, the paradigm of many disability insurers today is, "sharehold­er first". Profits take priority over protection of the disabled policy holder because of executive compensation incentives. At Allstate for example, senior management executives are required to own Allstate stock worth four times their annual salary. This plan flies in the face of the fiduciary nature of the insurance contract which pro­hibits insurers from "linking the inter­ests of management with those of shareholders" since the shareholders' only interest is increasing profits - even at the direct expense of policyholders.

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