Unethical Insurance Practices

Insurance Company Practices

Insurance is designed to protect and support you, but unfortunately, insurance companies sometimes engage in unethical practices meant to serve their own ends at the client’s expense. This may include overcharging, changing the terms of a contract, or failing to communicate.

Famously, in the case of Jerry Goldman – Tom Hanks’s insurance broker – the insurance company inflated premiums and manufactured fake invoices: ultimately costing Tom Hanks and his wife Rita Wilson thousands of dollars in excess fees and fraudulent bills. As a result, Goldman eventually had to pay $840,000 in restitution and serve 27 months in prison.

But insurance companies abuse plenty of non-celebrity clients as well. The following are unethical practices insurance companies may engage in:

Common Unethical Insurance Practices

Failure to communicate.

An insurance company may fail to notify you when it makes a decision regarding your insurance, or the company may fail to return your calls or emails after an accident.

Delaying settlement

Similarly, an insurance provider may delay your claim for settlement without a justifiable cause. Often, providers hope they can delay the settlement until you either forget or give up on your personal injury case.

Unreasonable demands

In connection with delaying settlement, an insurance company may make unreasonable demands meant to stall the settlement process, such as asking you for an unreasonable number of documents and claiming the process cannot begin until the company receives all these documents. If you fail to meet these demands, the insurance company may deny your claim.

Changing or cancelling the insurance policy

An insurance company may make sudden changes to its policy in response to a claim you filed, making it impossible for your claim to go through. Often, companies will cite the new policy as a reason to deny your claim. In other cases, a company may cancel the policy altogether after you try to file a claim.

Unethical investigating

In investigating your claim, the insurance company may use unethical or even illegal methods. Sometimes the company may fail to properly investigate your claim, or simply refuse to investigate at all and tell you your claim is denied.

Withholding policy information

Your insurance company should disclose the entire policy to you, including any policy limits. Withholding information or refusing to inform clients of policy limits constitutes an unethical insurance practice.

Conflict of interest

When an insurance adjustor tries to handle both your claim and the claim from the other party, a conflict of interest necessarily arises. This conflict of interest may lead to the insurance company receiving money from the other party in exchange for helping them, which means the company will shortchange you in favor of the other party.

Unreasonably low settlements

If an insurance company offers you a settlement that seems unreasonably low, you may be a victim of an unethical insurance practice. In this case, you should wait to accept the offer until you have consulted an attorney.


An insurance company may refuse to pay unless the client does something or doesn’t do something. This constitutes a threat, and is unethical.

Restrictive definitions

In some cases, an insurance company may fail to pay the client because the situation does not meet the company’s set of criteria. For example, an insurance company may refuse to pay a client who has had a heart attack if the client’s medical condition does not meet the definition of a heart attack as laid out in the insurance company’s policy.


Watch for agency fees or extra expenses that come in addition to the initial payment demanded by an insurance company, or expenses that are not specified in the quote given by the insurance company.

Recognizing unethical insurance practices

To be on the safe side, always demand a written quote from your insurance company for any transactions. This quote should include the name and contact information of the insurance company and agent or agency. If your insurance policy changes, you should receive an endorsement summary outlining the new policy. Likewise, after paying for a home or auto policy, you should receive a written declaration page and an ID card for your car insurance policy. Don’t pay for any additional fees that aren’t spelled out in the insurance quote, and don’t use a service (such as roofing, auto repair, etc.) you feel your insurance provider is pressuring you into using.

If you suspect your insurance company of unethical practices, you should consult with a lawyer before accepting settlement, agreeing to policy changes, or paying extra fees.