A cozy alliance between insurance companies and law enforcement has turned the justice system into the industry’s hired gun and left innocent customers facing prison

[T]he Coalition Against Insurance Fraud, a group composed of insurance companies, consumer groups, and other stakeholders, helped craft model legislation that guaranteed companies broad immunity from any customer who wished to sue for being wrongly accused of fraud.

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To successfully sue over false fraud accusations, a consumer has to prove the insurer acted with malice or bad faith — a high bar that typically requires expensive litigation to obtain internal company records.

“They’re saying, ‘We have a right to be wrong, and if we’re wrong you can’t sue us,’” said Amy Bach, the executive director of United Policyholders, a consumer group that advocates for insurance policyholders. “You know how you have fishing nets for tuna and it also catches dolphins in the same net? If the system is too aggressively or too broadly applied, it hurts people who did not commit fraud but can’t muster the resources to defend themselves against the juggernaut of a big corporation.”

To me, this is the most pernicious part of this entire arrangement. Here you had an industry which literally specializes in risk management, and you allow them an asymmetrical benefit. Obviously they're going to abuse it. It's like that one oft-quoted Fight Club scene, except now we're comparing the likelihood of a person taking a plea deal to the likelihood of an insurance company losing a lawsuit (or more realistically, settling).

A new car built by my company leaves somewhere traveling at 60 mph. The rear differential locks up. The car crashes and burns with everyone trapped inside. Now, should we initiate a recall? Take the number of vehicles in the field, A, multiply by the probable rate of failure, B, multiply by the average out-of-court settlement, C. A times B times C equals X. If X is less than the cost of a recall, we don't do one.