1.Beginnings
Chapter One traces the earliest examples of insurance-like protection to ancient Babylon and the rule of King Hammurabi. It then explains how the Babylonian innovation spread throughout the Greek and Roman Empires, where it was eventually joined by another innovation in the mutual burial clubs of ancient Rome.
Key Characters:
King Hammurabi
Hegestratos and Xenothemis – history’s first recorded insurance fraudsters
The Knights Templar
2. The Great San Francisco Earthquake
Chapter Two discusses the rise of Lloyd’s in London as the world’s largest insurance market. It then details the first catastrophic loss for the insurance world; the 1904 earthquake that devasted San Francisco. Claims were initially rejected, until people power combined withl egal and regulatory muscle to force insurers to pay out the equivalent of $8.1 billion.
Key Characters
Edmund Halley – Astronomer
Edward Lloyd – founder of Lloyd’s Coffee House
Cuthbert Heath – insurance innovator
Myron Wolf – California Insurance Commissioner
3. Asbestos
Chapter Three explains how asbestos, one of the most lethal substances nature has ever produced, became a mainstream component in construction, insulation, and fire protection. It reveals the strategies that the asbestos industry, with the help of their insurers, used to conceal evidence that exposure to asbestos began a long, slow, but inexorable path toward an agonizing death. Finally, the determination and creativity of plaintiff lawyers, supported by ground-breaking medical research, revealed the true horror. The losses destroyed the asbestos industry, and insurers today continue to face claims that have now exceeded $300 billion.
Key Characters
Henry Ford
Donald MacPherson – a stonecutter
Ludwig Hatschek – inventor of fibre cement sheeting
Dr Anthony Lanza – medical advisor to MetLife
Dr Irvin Selikoff – proved that asbestos caused cancers
Clarence Borel – asbestos insulation fitter
Ward Stephenson – Borel’s attorney
Richard Outhwaite – Lloyd’s Underwrit
4. Toxic Waste
Chapter Four reveals how the Lloyd’s insurance market, already reeling from massive asbestos losses, was almost sent to oblivion by another industrial catastrophe. The discovery of toxic waste dumps at Love Canal, the Rocky Mountains Arsenal, and Kentucky’s Valley of the Drums, led to the enactment of the Superfund legislation and its punitive financial penalties. While insurers had some early success in denying claims, ultimately they were forced to pay over $100 billion, and Lloyd’s had to restructure in order to survive.
Key Characters
Nicola Tesla – inventor
William T Love – creator of the Love Canal
Michael Brown – news reporter
Lois Gibbs – founder of the Love Canal Homeowners’ Association
Rachel Carson – author of Silent Spring
Bill Brown – London insurance broker
David Coleridge – Lloyd’s Chairman
Peter Middleton – Lloyd’s CEO
5. Hurricane Andrew
Chapter Five discusses the first Category Five hurricane to strike a major US city. In 1992, Hurricane Andrew brought to Florida winds of 160 miles per hour and insurance losses of $60 billion. The local insurance market would mirror the devastation on the ground, with sixteen insurers going into liquidation. The rest of this insurance world looked on aghast and began searching for ways to avoid a similar fate. This was the stress test that ultimately led to the rise of Delay Deny Defend.
6. The Northbridge Earthquake
Against the background of $20 billion in insurance losses from the 1994 Northbridge Earthquake, this chapter details the origins of Delay Deny Defend. A response to a stubbornly low insurance premium cycle combined with sky-high performance expectations from a booming US stock market, insurers began playing hardball on legitimate claims to improve their profitability. The tenacity of David Berardinelli, a plaintiff attorney, finally revealed Delay Deny Defend to the world, a scandal
7. Hurricane Katrina
This Chapter discusses the impact of Hurricane Katrina, which struck New Orleans in 2005, causing $100 billion in damage.Unlike Hurricane Andrew, Katrina brought with it the dreaded sea surge, raising the sea level by four metres, reversing the flow of the Mississippi and breaching flood levees that walled the city.
Almost immediately after the hurricane had passed, reports began to emerge of insurers flatly denying damage claims. After receiving 26,000 complaints,
Louisiana’s Insurance Commissioner sued a group of insurers alleging a conspiracy to defraud policy holders but lost the case. The insurance bill was still huge at $45
billion, but in the insurance world Katrina was seen as an example of good risk and claims management.
Key Characters
US President George Bush
Ray Nagin – Mayor of New Orleans
Charles Foti – Louisiana Attorney-General
Cori and Kerri Rigsby – Claim adjusters for State Farm Insurance
8 – Corporate Fraud
The boom stock markets of the 1980s and 1990s birthed the Delay Deny Defend claims management strategy, but insurers were not the only industry struggling to meet performance expectations. This chapter looks at two of the largest bankruptcies in corporate history, Enron and WorldCom, both of which involved fraud on a massive scale. The extent to which insurance can protect companies and their directors when fraud is uncovered is also examined. Finally, the role of Arthur Andersen as auditor to both companies (no, it was not a coincidence) is highlighted, a scandal that will continue into the next chapter.
Key Characters
Kenneth Lay – Enron CEO
Jeff Skilling – Mackinsey consultant
Bernie Ebbers – WorldCom CEO
Arthur E Andersen – founder of Arthur Andersen & Co.
9 – HIH Insurance
While Enron and WorldCom were relying on financial fraud to hit their budget targets, an Australian insurance company was doing essentially the same thing. HIH Insurance grew from a two-man operation to become a global empire, with operations in the US, the UK, and Europe. It seemed a story too good to be true, and so it proved to be when massive accounting fraud was uncovered and HIH went from being the second-largest Australian insurer to the largest ever Australian corporate bankruptcy.
The fallout included the cancellation of surgeries, construction, legal process and compensation payments as millions of HIH policies were rendered worthless. The economic impact of the HIH failure resounded for years and influenced the US Federal Reserve considerations on rescuing another insurer – a story for a later chapter.
Key Characters
Ray Williams – HIH Insurance CEO
Rodney Adler – FAI Insurance CEO
Tony McGrath – KPMG insolvency partner
Malcolm Turnbull – future Australian Prime Ministe
10 – The World Trade Centre Attacks
This chapter looks at the insurance stories behind the worst terrorist attack ever perpetrated. The destruction of the World Trade Centre led to a bitter insurance over whether there had been one loss or two. At stake was a $7 billion property insurance claim – the largest ever lodged – and the policies had been issued only forty-nine days earlier. The details of the claims negotiations are revealed, including the attempt by some insurers to avoid the loss based on President George Bush’s “War on Terror” speech.
Key Characters
Terrorists from the Abu Nidal Organisation
Phillippe Petit – circus performer
Larry Silverstein – New York property developer
Henry Willis – founder of The Willis Group (insurance brokers)
US President George Bush
Geoff McKinley – California-based insurance broker
David Bouley – celebrity chef
Warren Buffett – Berkshire Hathaway CEO
11 – The Global Financial Crisis
In this chapter we look at the most devastating market crash in living memory, and the role that a global insurer, AIG, played in it. The rise of sub-prime mortgages, their evolution into complex financial products, and ultimately into weapons of mass financial destruction is revealed. The massive collapse that sent the world into a financial freeze in 2008 bankrupted AIG, forcing the US Federal Reserve to step in and effect the largest corporate rescue of all time.
Key Characters
Steve Outtrim – Sausage Software CEO
Hayne Leland and Mark Rubenstein – founders of Leland O’Brien Rubenstein
Roger Lowenstein – author of When Genius Failed
John Symond – Aussie Home Loans CEO
Cornelius Vander Starr – founder of AIG
Maurice (Hank) Greenberg – AIG CEO
Elliot Spitzer – New York State Attorney General
Martin Sullivan – AIG CEO after Greenberg
Timothy Gleithner – Federal Reserve Chair
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12 – The Pacific Palisades Wildfire
This chapter was written at the time when the Pacific Palisades fires were still burning. It looks at the impact of fire in two countries that face perhaps the greatest fire risk; Australia and the US. The politics of insurance in California are discussed, along with the rise of traditional burning as a potential solution. At an estimated $45 billion in insurance losses, the Pacific Palisades fire is likely to become the costliest wildfire in insurance history.
Key Characters
Captain James Cook – commander of the Endeavour
Marquette and Ronald Frye – residents of Watts, Los Angeles.
Ricardo Lara – California Insurance Commissioner
Billy Crystal, Mel Gibson, Anthony Hopkins, and Paris Hilton – Pacific Palisades residents
13 – Conclusion
This chapter explains the Dealy Deny Defend strategy as a response by the insurance world to the intense stock market pressures of the 1980s and1990s. With the collapse of HIH and the near collapse of AIG during the global financial crisis, performance expectations eased. Delay Deny Defend was never a sustainable strategy, and so it proved to be for the general insurance world. However, the strategy has jumped like a virus, from one host to another. There is a growing body of anecdotal evidence that the Health Insurance world is now adopting a version of Delay Deny Defend. In the US, where Health Insurance is the primary access point for healthcare, the implications are profound. To deny such claims is to deny medical care at times when, in some cases, lives are at stake.
In 2026 we may discover that Delay Deny Defend also led to a shooting death on a New York street.
Key Characters.
Luigi Mangione – accused of the murder of Brian Thompson