Insurance Companies and the Wicked Games they Play
June 7, 2019
Are you trying to figure out how to negotiate with an insurance adjustor after a car accident? They might sound like they are your friend, but think twice before trusting them. Your interests are not aligned. The adjustor's job is to pay you as little as possible to go away. You might be dealing with one person, but before you start feeling comfortable, you should know about the billions of dollars, immense resources, and systems behind that one person.
In 2018, State Farm reports a $1.7 billion underwriting gain. Add to that the money they made investing premiums ($4.7 billion) means State Farm's net income was $6.3 billion. Many people think that insurance companies make their money off the premiums and they are only partially right. If the whole equation was (premiums) - (claims paid) = (net income) then most insurance companies would face financial troubles, or at least be on a volatile financial roller coaster. The way insurance companies insulate against the volatility is to invest the premiums. Okay, you're scratching your head and wondering, "why do I care?" Here's why you care. This revenue model incentivizes the insurance company to hold onto their money as long as possible, because the longer it is invested, the more the money will grow. That incentive means they profit when they delay. "Deny! Delay! Defend!" This is the mantra of the insurance companies.
Another insurance policy that results in unjust outcomes is how they classify auto claims. Did you know that if you have only minor property damage (usually less than $1,000 to repair) that they value your claim as a "minimal impact" which means they will not consider any serious injuries or significant bills for treatment. Insurance companies internally refer to these claims as "MIST" claims, standing for "Minimal Impact Soft Tissue." There are hundreds of studies that show even a low impact collision can cause injuries to the occupant of a vehicle and that the damage to a vehicle is not a good indicator for the injuries to the occupant.