Marc Mayerson wrote an excellent piece for his blog, InsuranceScrawl. Basically, he points out that insurance companies are receiving favored treatment from the courts when they act in bad faith. After a US Supreme Court Case, State Farm v. Campbell, state courts are restricting the damages that insureds can receive when the insurance company acts in bad faith.
Courts are limiting the recovery because the damage to the insured is only economic. Thus, there is no physical injury associated with the conduct of the insurance company.
The courts just have this wrong. A big insurance company that treats its insureds poorly and does not resolve claims timely and for a fair amount causes damage to the insured. Some people lose their homes. They cannot rebuild. They cannot replace the items that were lost or damaged. This creates stress on families, on marriages and on people.
The insurance companies may not physically injure someone. But their behavior is just as bad. The more the insurance companies can get away with this bad behavior, the more it will continue. Punitive damages are designed to punish the wrongdoer and courts need to be willing to punish the insurance companies to discourage this behavior.