State Attorney General Gentner Drummond is leading a crackdown on Allstate and State Farm.
This piece was originally published by The American Prospect.
Key Insights
| Oklahoma Attorney General Gentner Drummond recently filed lawsuits accusing Allstate and State Farm of unjustly denying or underpaying wind and hail-related claims. The complaints allege that both corporations set up racketeering schemes to systematically defraud home insurance policyholders whose roofs were damaged during severe storms—covertly toughening standards to avoid having to pay claims, limiting the decision-making authority of certified adjusters, and relying on unlicensed outside reviewers or upper-level managers to cut payouts to consumers. Allstate and State Farm have reportedly cheated tens of thousands of customers and pocketed billions of dollars in the process. Drummond is seeking to halt and dismantle both firms’ alleged payout minimization schemes and compel the “disgorgement of illicit profits.” The scope of abuses alleged in Oklahoma’s lawsuits against Allstate and State Farm exemplifies the need for robust regulatory and enforcement action throughout the United States. The suits provide a clear opening for other public officials to crack down on Big Insurance. What Oklahoma’s lawsuits against Allstate and State Farm reveal is two-fold: 1) Powerful insurance companies are impeding the ability of households to recover from extreme weather events, and 2) they are obscuring the true scale of mounting climate risks and thus the magnitude of proactive adaptation that’s necessary. Accurate insurance payouts should be sending a clear signal about real climate risks. But by stiffing consumers to boost profits, insurers offload the costs of the fossil fuel-driven climate crisis onto individuals while also distorting a metric that should indicate just how much investment is needed to climate-proof the country’s housing stock. Through investigations, enforcement actions, and lawsuits, public officials can help liberate useful information about worsening hazards and make it available to planners and others involved in reducing disaster risk at all levels of society. |
This summer, Oklahoma Attorney General Gentner Drummond filed a pair of lawsuits against Allstate and State Farm, accusing the property insurance giants of unjustly denying or underpaying wind and hail-related claims. The suits allege that both corporations set up racketeering schemes to systematically defraud home insurance policyholders whose roofs were damaged during severe storms. According to the complaints, the companies for several years have covertly altered claims standards to achieve fixed outcomes—that is, made them tougher to avoid having to pay claims—limited the decision-making authority of certified adjusters, and relied on unlicensed outside reviewers or upper-level managers to cut payouts to consumers.
As Allstate and State Farm allegedly short-changed consumers who believed they had been paying for full coverage, both companies made enormous profits. Bob Hunter, an actuary who previously served as Texas Insurance Commissioner and then led insurance fairness advocacy work at Consumer Federation of America, said that he’s “never seen anything so atrocious” when it comes to claims mishandling. Based on documents unveiled in preexisting civil cases brought by plaintiffs, Allstate and State Farm have reportedly cheated tens of thousands of customers and pocketed billions of dollars in the process. Drummond is seeking to halt and dismantle both firms’ alleged payout minimization schemes and compel the “disgorgement of illicit profits.”
It’s important to note that Oklahoma is not the only state confronting the property insurance industry. Investigations and legal actions are also underway in California and Illinois. Still, for the many public officials who have yet to act, the scope of abuses alleged in Oklahoma’s lawsuits against Allstate and State Farm—filed by a Republican attorney general in one of the most conservative states in the country, no less—exemplifies the need for robust regulatory and enforcement action. In short, Drummond alleges that these corporate giants are unfairly profiting by tricking people about insurance terms, refusing to pay out legitimate claims, and so on.
Property insurers make profits in two ways. Some money comes directly from underwriting, or the practice of selling insurance coverage. Although home insurers are doing better on underwriting than they suggest, their most important source of profit comes from investing policyholders’ premiums in capital markets. Both sides of the business are closely linked. Predatory practices on the underwriting side, such as claim denials and delays, help fuel high investment returns because they enable insurers to keep more money in financial markets for longer.
The country’s five largest property insurers, including Allstate and State Farm, now close nearly half of all homeowner claims without payment, up from just over a third in 2016. Furthermore, a recent analysis shows that every day homeowner claims are postponed yields $8.8 million in extra interest and investment income for the industry. Engaging in unscrupulous practices to minimize payouts and maximize revenue available for investing helps explain how insurers continue to rake in massive profits year after year even amid the climate crisis.
Taking On Big Insurance in Oklahoma
Oklahomans pay more than twice the national average for home insurance. And yet, about a quarter of all homeowners’ claims are denied statewide, according to data from the National Association of Insurance Commissioners. What’s more, between 2021 and 2025, the ratio of claims closed without payment to total claims closed grew by 13 percent statewide, the fifth-highest increase in the country during that period. Oklahoma trailed only Iowa (41 percent increase), South Dakota (40 percent), Minnesota (17 percent), and Louisiana (16 percent). The first three states listed are, like Oklahoma, major recipients of hail and wind.
In addition to allegedly improperly denying claims, Allstate and State Farm are accused of drastically slashing payments to policyholders.
Drummond alleges that Allstate has done this by implementing a program called the “Disaster Payment Minimization Scheme.” Despite marketing its policies as providing replacement cost coverage for storm-related damages, Allstate “does not issue” such policies in Oklahoma, according to Drummond’s lawsuit. Instead, the company has “secretly substituted restrictive, extra-contractual standards and used those hidden standards to deny or minimize payment of legitimate covered losses” since at least 2020 in Oklahoma and other markets.
To hit its “predetermined savings targets,” Allstate has allegedly stripped licensed field adjusters of their ability to approve coverage of wind and hail-related losses along with repair cost estimates. In addition, the suit accuses Allstate of replacing in-person inspections performed by adjusters with visits from unauthorized, third-party “picture-takers.” Ultimate decision-making authority allegedly rests with external “reviewers” who “routinely deny coverage and require adjusters to alter their estimates” to satisfactory levels. According to the suit, Allstate often eliminates payments entirely by reducing an estimate “below the threshold of the policyholder’s deductible.”
As Oklahoma Watch reports, the methods allegedly used by Allstate to arbitrarily reduce hail and wind claim payouts throughout the Sooner State can be traced to a pilot program the company launched in Albuquerque, New Mexico, in 1997, at the behest of management consultants at McKinsey and Company.
In a statement, Allstate said, “This lawsuit has no merit and serves Billboard Lawyers who turn routine insurance claims into lawsuits, making insurance more expensive for everyone. Allstate is committed to supporting customers with timely and fair claim payments based on their policy to help them recover from storms.”
Drummond’s lawsuit against State Farm contains very similar allegations. It accuses the company of conspiring for years to reduce roof replacement approvals and lower claim payments in Oklahoma and other markets through a scheme known as the “Hail Focus Initiative.” State Farm management asserted internally that the company “was approving ‘too many’ roof claims,” according to the suit. In response, State Farm modified its internal claim standards and curtailed field adjusters’ authority to approve full roof replacements—changes made “with the express purpose of reducing the total number and dollar amount of roof indemnity payments,” the complaint says. Under the program, the company allegedly requires “higher-level managers” to greenlight total roof replacements, thus “creating additional layers of scrutiny and opportunities to deny, delay, and limit claims.”
State Farm’s “remote evaluation process for claims” was first tested in Dallas, Texas, in 2020 before being “quickly expanded” to other states, per Oklahoma Watch. The outlet notes that Nicole Manduca, described as the “ringleader” of the company’s wind and hail initiative, had announced a goal of shrinking payouts by 50 percent and “subsequently boasted of success” on social media. A plaintiffs’ attorney told the outlet that State Farm in 2026 is using the same restrictive definitions of hail damage devised 20 years ago by Haag Engineering, a technical consulting firm that Allstate hired to retrain its employees.
In a statement, State Farm said that it “remains committed to helping customers recover after storms, providing access to insurance, and working constructively with the regulator to benefit Oklahoma consumers.” “We fairly and diligently evaluate every claim and pay what we owe under the policy based on the facts and coverage purchased,” the company claimed. “Unfortunately, the continued focus on these allegations appears driven more by political motivations than by the facts or the needs of Oklahoma consumers.”
Broadening the Crackdown on Big Insurance
Other states are also taking action. In California, where many people who survived the early 2025 Los Angeles wildfires have been forced to wait for insurance payouts, claim denials and delays have received more attention lately, including from regulators. The California Department of Insurance in May took legal action against State Farm after its investigation documented hundreds of violations of state law in the company’s handling of wildfire and smoke damage claims. While the fine sought by regulators is miniscule because penalties are legally capped at $10,000 per violation, the department also filed an administrative action that could lead to the suspension of State Farm’s license to write new policies in California for up to a year. Moreover, deterring corporate misconduct is high on the list of priorities for the candidates vying to replace outgoing Insurance Commissioner Ricardo Lara.
Officials in Illinois, where Allstate and State Farm are domiciled and thus subject to additional scrutiny, have also taken important steps to rein in corporate wrongdoing. Last year, Attorney General Kwame Raoul sued State Farm over the company’s alleged obstruction of an investigation into the company’s underwriting practices. According to the lawsuit, filed on behalf of Illinois Insurance Director Ann Gillespie, State Farm has refused to provide data in compliance with the regulatory examination that Gillespie’s department launched in 2024.
It’s a different story in Oklahoma. Drummond, one of two Republican gubernatorial candidates who advanced to Tuesday’s primary runoff, had to take matters into his own hands because Insurance Commissioner Glen Mulready is evidently not interested in the problem. Like many other state insurance commissioners, Mulready passed through the revolving door from the industry he’s now tasked with regulating, having previously served as VP of marketing at Blue Cross Blue Shield of Oklahoma. Mulready has never used his authority to deny a rate hike requested by a home insurer; in fact, he has expressed opposition to regulating insurance rates in general, opining that maintaining a “competitive free market” will do the trick. It’s not exactly shocking to think such a character would refrain from exposing and fighting the claims mishandling epidemic plaguing Oklahoma’s insurance market.
This situation is less than ideal. As Consumer Federation of America pointed out recently, “Mulready’s inaction made conventional oversight ineffective, leaving the Attorney General’s office to fill the gap through litigation—which means consumers might only get protected after the damage has been done rather than protected from it, as sound regulation could have provided.”
While developments in Illinois reflect the promise of complementary action between insurance commissioners and attorneys general, Oklahoma illustrates that in practice, some AGs may have to act in spite of passive regulators. In any case, much work remains to be done by insurance commissioners and attorneys general. People around the country are clamoring for stronger oversight and accountability. Drummond’s lawsuits, which allege that Allstate and State Farm are ripping off consumers in Oklahoma and “other markets,” provide a clear opening.
Foregrounding the Climate Crisis
One thing will almost certainly be missing from state lawsuits unless advocates fight for its inclusion: the all-important climate crisis angle.
Like other forms of extreme weather, the severe convective storms ruining roofs across Oklahoma (and elsewhere) are becoming more frequent and intense due to fossil fuel-driven global warming. The insurance industry is not an innocent bystander in all of this. It continues to prop up the fossil fuel industry, the leading source of planet-wrecking emissions, through its dirty energy investments—more than half a trillion dollars’ worth, led by State Farm and Berkshire Hathaway—and by underwriting new coal, oil, and gas projects. Moreover, the American Property Casualty Insurance Association, the industry’s biggest lobbying group, recently sided with Big Oil in the latter’s fight against climate liability lawsuits. While portraying themselves as helpless victims, insurers are exacerbating climate chaos.
What Oklahoma’s lawsuits against Allstate and State Farm reveal is two-fold: Powerful insurance companies are impeding the ability of households to recover from extreme weather events, and they are obscuring the true scale of mounting climate risks and thus the magnitude of proactive adaptation that’s necessary. Accurate insurance payouts should be sending a clear signal about real climate risks. But by stiffing consumers to boost profits, insurers offload the costs of climate change onto individuals while also distorting a metric that should indicate just how much investment is needed to climate-proof the country’s housing stock.
At issue is alleged systemic fraud on a mass scale. And it’s inseparable from our deteriorating climate mess. In addition to harming individual policyholders, Allstate and State Farm’s reputed pattern of underestimating roof damages throughout Oklahoma twists the picture of how badly entire communities are being, and will be, negatively affected by pollution-turbocharged storms. The firms’ alleged deception makes disaster prevention and mitigation that much harder. Just as fossil fuel companies with detailed knowledge about the need for decarbonization delayed action, insurers are sitting on troves of data that could be used to improve resilience.
The potential benefits of cracking down on property insurers go beyond thwarting “unjust enrichment” as called for in Drummond’s petitions against Allstate and State Farm. Through investigations, enforcement actions, and lawsuits, state officials can help liberate useful information about worsening hazards and make it available to planners and others involved in reducing disaster risk at all levels of society. To rein in this increasingly rapacious industry, federal and state governments will have to step up their regulation and oversight.
The above photo of Allstate CEO Thomas Wilson comes from the company’s 2016 annual report.