Tina Willis Law Blog has an article discussing a 2009 law review article called Run-of-the-Mill Justice, about so-called settlement mills, large-volume plaintiffs' personal injury firms that acquire most of their clients by advertising.
Towards the end of the law review article the author discusses the advantages to insurers of dealing with those types of firms. The article posits that the insurers end up paying a lot of low-value cases for more than they are worth, but in exchange they are able to settle high -value cases at a steep discount.
I began my career as an insurance-defense attorney and I still do quite a bit of insurance defense work, most of it indirectly on a subcontract basis. In the hundreds of cases I have defended or participated in defending over the years, only a small handful have been brought by the types of firms discussed in the article, although they certainly exist in this state. My experience was that the attorneys that handled them were average: certainly no standouts in their representation of their clients, but they knew what they were doing.
Insurance defense attorneys tend to only see the more interesting cases: cases that go into suit rather than settling pre-suit because there is a question over liability or the case won't settle for its reasonable value as perceived by the adjuster.
Nevertheless, the idea that insurance companies have a symbiotic relationship with plaintiffs' mills does not ring true to me. I have worked with many adjusters and their supervisors, both on the side of the insurer/insured and on the side of the claimant. I simply can't imagine any department settling low value cases for more than they're worth in the expectation of an easy settlement in a high value case. That's the sort of allegation that I would expect the state attorney general to look into, as it would be a large volume unfair settlement practice.