Insurance companies routinely enhance their profitability by utilizing tactics designed to minimize or deny the payout on your claim.
It's called a "float". Money is collected from policyholders in the form of premiums. Your premiums are then invested, "floated", by the insurance company for its own profit. But at what point is there a conflict between the profit motives of the insurance company and the welfare of its policyholders?
While insurance companies profess to maximize profits by investing your premium dollars, the process is flawed. Diverse market situations create a volatile environment for investments. The inherent risks of investment can cut heavily into the profitability of an insurance company. While companies cannot control the volatility of interest income, they can control the payout on claims.
Manipulation of claims payouts has become ingrained in the corporate insurance community with such success that "routine" claims handling cannot be distinguished from "bottom-line" claims handling. The effect is to create serious insurance claim problems for unsuspecting policyholders.
In order of success, companies can enhance their profitability by utilizing three general tactics.
Lowballing, or undervaluing your claim is the most profitable and the most common method used to manipulate claims payments.
Consider that this approach is utilized in virtually all insurance claims. Claims settlements are actually claims negotiations. Recognize that the process occurs on a very unlevel playing field.
(1) Assume that your claim is undervalued. (2) Conduct your own independent research regarding the value of your loss. (3) Recognize that you will need to fight to get past the "range" of value offered in your claim. Adjusters are taught to negotiate for less than a claim is worth. Management provides adjusters with authority ranges, and they are expected to begin their negotiations at the bottom of that range. If you question the lowest offer, the theory is that you will accept the next offer within the adjuster's range.
Wrongful claims denial is the second most profitable tactic.
Unscrupulous insurance companies recognize the enormous profitability potential of claim denials. If you do challenge the denial, they can respond with a lowball offer. If you do not challenge the denial, they have realized pure profit.
If your claim has been unjustly denied, you must resist. Understand that insurance companies are bound to find ways to pay claims, not to search for means to deny them.
(1) Insist on a written recitation of the policy provisions utilized as a basis for the denial. (2) Adhere to any appeal processes specified in your policy. (3) File a complaint with your state insurance regulator. While state agencies cannot force your company to pay your claim, the complaint can serve to indirectly hasten a successful conclusion. (4) Seriously consider a legal opinion.
Claims delays represent the third most profitable tactic used to separate you from your money.
Paramount in the delay tactic is the belief that by forcing you to wait for settlement of your claim, you will eventually give up. Giving up translates to less money for the claim payment and more money for the insurance company. While there are a multitude of common delay tactics, one of the most common methods stems from the company's attempt to impose on you, biased interpretations of your policy. To combat this, you must read and strive to understand your insurance policy. Approach your agent for clarification or conduct independent research.
Insurance companies have a responsibility to investigate all claims. The key is that the investigation must be reasonable and timely.
There are other actions you should take. (1) Communicate with your adjuster. Insist on a time frame for an update on your claim and follow up with the adjuster when the time is met. (2) Insist on a full account of the reasons for the delay. If an explanation is not provided, follow up in writing. (3) Offer to provide any additional data which would prove helpful to the positive resolution of your claim.
You are not entitled to receive more than you are owed – but your company is bound to treat you fairly and to return you to the condition you enjoyed prior to your loss. Anything less is unacceptable. The key to your success depends on your ability to arm yourself with knowledge of your rights, recognition of the tactics used against you, and your refusal to accept that the insurance company holds all the power.
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