Delay, Deny, Defend summary

If you look at the marketing from major American insurance companies, it would seem that you're going to be looked after. State Farm promises they’re “like a good neighbor.” Allstate, meanwhile, tells you “you’re in safe hands.” After all, isn’t the purpose of insurance to know you’re protected when things don’t go according to plan? To have that peace of mind when disaster strikes?

But for millions of Americans, the relationship between insurer and insured has completely broken down. Cindy Robinson discovered this the hard way. Her car’s back wheel randomly fell off while she was driving, leading to a serious back injury. She’d paid her premiums diligently for years—surely, her insurer would be there for her when she needed them most. Six months after the accident, she’d racked up $11,000 in medical bills. The check she received from her insurance company? Just $1,662 dollars and 18 cents.

But the story wasn’t over. The pain continued to get worse, so she decided to go in for surgery. After the operation, the hospital refused to conduct physical therapy. Why? Because her insurance hadn’t paid the outstanding bills. It’s a situation many Americans are familiar with, and it left Cindy feeling completely trapped. She was in pain, in debt, and the company that had promised to protect her had hung her out to dry. It took another three years—and hiring an attorney—for her to get the money she was owed.

Now, while this might sound like bad customer service, it turns out it’s actually a deliberate strategy with a simple name: Delay, Deny, Defend.

The math behind the strategy is deceptively simple. The purpose of insurance companies is to collect premiums from millions of customers, most of whom never file a claim. All those premiums add up to a huge amount of money, dubbed the float by the industry. But here’s the thing: every day an insurer delays paying your claim, they earn income on investments they’ve made with your money. And every claim they deny stays in the float forever. It’s really that simple—every dollar they give to you is a dollar less for their shareholders.

Now, things weren’t always like this. Traditionally, insurance claim adjusters were taught to pay what the company owed—no more, no less. It was a simple job: figure out what the policy covered, and get it paid. Just how you’d expect such a system to work.

But that all changed when insurers started seeing their claims departments less as service centers and more as profit centers. Instead of paying claims quickly, every cent became a negotiation. Lawyers were hired. Computer systems were created to automatically lowball settlement offers. We’ll get into more detail on all of these dirty tricks in the sections ahead.

All of this didn’t happen by accident, though. Let’s now take a look at where all of this began: the hallowed boardrooms of McKinsey & Company.