The Insurance Industry Itself: A Conflict of Interest?
February 18th, 2007 by Grant in: InsuranceTonight CNN ran a big piece on how insurance companies are trying to settle claims for next to nothing compared to what they’re worth, in many cases not even coming close to covering medical bills, let alone covering the repair to your vehicle.
While the television report was more in-depth, this article covers the high points.
The whole concept of this report brings up the question: If insurance companies are in business to insure your assets, but they’re also in business to make money for themselves, isn’t that a conflict of interest?
After all, every penny they shell out in claims is one less penny they show on their bottom line. In effect, its in their best financial interest to not settle any claims at all, or at the very least, the lowest payout possible.
In the article, as well as in the television piece, it is revealed that insurance companies prefer to have you take them to court over claims, knowing that if they can drag out the claim, they stand a good chance of paying you much less than your claim is worth.
“The strategy, according to former Allstate and State Farm employee Jim Mathis, relies on the three D’s — denying a claim, delaying settlement of the claim and defending against the claim in court. -Source“
From a business aspect, this makes perfect sense. The business is in business to make money, not to give it away. It’s too bad though that when you pay your premium, you expect to have the company pay you for your claim, should you need it. After all, isn’t that what insurance is for?
Insurance companies will state that they fight claims in court to battle insurance fraud, which they claim is running rampant and is the direct cause of rising premiums. The problem is, insurance fraud accounts for only 4% of the claims they will pay out, and that number hasn’t risen for years. So it’s tough to say that insurance fraud is “running rampant”.
To compound this problem, as an owner of an automobile, you don’t have a choice. You must have insurance for your car.
It sure compounds the “conflict of interest” issue, doesn’t it?
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February 19th, 2007 at 10:25 am
Excellent write-up!!
Insurance is a scam. My vehicle was stolen last Friday, I contacted my insurance company, and when asked what I needed to do they told me to sit tight and wait for an insurance claims agent to call me. FOUR days later on Tuesday I get a call from my agent telling me they’ll wait 10 days from the time of THAT call to see if the vehicle shows up before making a settlement offer. Now I’ve got to plan for the worst and figure out how to make a vehicle purchase with the little I’m expecting from my insurance company….
February 22nd, 2007 at 10:18 pm
Hey Winston, did you ever hear anything back from the insurance company?
February 27th, 2007 at 7:19 pm
Insurance is such a scam! Winston keep us advised of your experience. who is ur insurance co?