Insurance companies are making record profits to the tune of $687 billion dollars (that’s with a “b”) and yet, my insurance premiums seem to go up almost every year. The reason? The government requires each and every one of the 200 million drivers in the United States to purchase auto insurance by law or face a hefty penalty. Even though it’s the law, there is very little regulation in place to monitor how insurance companies use the premiums that you and I pay every month.

It’s been said that in order for insurance companies to be profitable, they need only $.30 of every premium dollar for overhead and profit, leaving $.70 of every dollar for claims. In recent years, insurance companies have been paying only $.55 of every dollar in claims, and keeping $.45 of every dollar. The result? Record profits year over year.

So how do the insurance companies do it? By using some of the harshest negotiation tactics known to man. A 150,000 page internal memo at Allstate was released to the public in 2006. It outlined the tactics that Allstate adopted to ensure that they would be making the largest profit the company had ever seen. It was described as a “Zero Sum Economic Game. Allstate gains … others must lose” with you as the injured person being the “other” that must lose.

They would apply tactics such as denying legitimate claims because they knew the cost of filing a lawsuit was too great. Offering small settlements and refusing to negotiate. They purchased a computer program called Colossus that was programmed to reduce settlement values by 20%. They would try and get you to settle in the first few weeks of the accident knowing a lot of your injuries may not be fully manifested reducing their exposure to higher medical bills. And finally, if you didn’t settle within the first few weeks, they would pull out the “boxing gloves” and sit on your claim for years and drag it through lengthy litigation until you were so frustrated that you would settle for whatever they offered you, not what your claim was really worth.

As Allstate started reporting record breaking profits, other insurance companies began to adopt the Allstate pattern. This has resulted in almost every insurance company using some form of a computer program such as Colossus and applying some or all of the Allstate tactics to ensure they make record breaking profits, all by minimizing the amount they pay in settlements to you and I.