Nearly everyone has an insurance product, as I explained in the first article of this series, Corporate Body Snatching and Customer Rustling – How Insurance and Investment Companies Steal Customers For Huge Profits. Here I’m going to focus on Property and Casualty Insurance. Also known as Auto and Homeowner’s, this is how people can be tricked and manipulated.
The functions of homeowner’s and auto insurance are similar to health insurance. The premiums paid by an insured are almost pure profit if they don’t make any claims. This type of insurance company is like a pool of money fed by a steady stream of premium dollars. The company will pay a pre-agreed sum to the client if something happens to one of its premium payers. Due to the insurance policy’s deductible, the total settlement paid to the client rarely exceeds 100% of the loss. Anyone who has ever filed an accident claim knows how this system works. Most people don’t realize how easy it is to get less compensation than they are entitled.
Insurance is basically a promise to cover financial loss due to an accident, illness, liability, death, or other circumstances. Only valuable items can be insured against loss and only legitimate claims will be honored. Animals can also be insured. One horse breeder insured $100,000 for the life of his prizewinning stallion. He promptly filed a claim after the horse died unexpectedly. The horse’s head was found to have a bullet hole by the insurance adjuster. After an inquiry, it was discovered that the horse couldn’t conceive offspring. The breeder decided to kill the horse in order to collect the $100,000 coverage. The horse’s insurance policy covered untimely death from accident or health. The slaughterhouse paid the breeder what he owed for his bad judgment. It pays to be able to comprehend what insurance covers and how it works before you purchase it.
Many insurance companies will deny claims, as was the case with hurricane Katrina victims who were told their homes were destroyed by storm surge, and not high winds or pounding rain. These insurance companies are not multi-billion dollar corporations because they were generous with their clients. They will find every excuse to keep the money at the end of the day. The claims adjuster must do all they can to disqualify a claim filed by a policyholder for injuries sustained in an auto accident or damage to their home. Some companies offer adjusters financial incentives, such as a percentage of the claim for negotiating the lowest possible payment.
Here’s an example of how settlement might look. A client had their roof damaged by a severe storm and large hail. Instead of paying $5000 for the replacement of the shingles, the insurance company offered $5000. However, the claims adjuster persuaded the client to pay $500 less as a tree branch also fell on the roof. According to the homeowner’s policy, a tree falling on a home is not covered. As a bonus, the adjuster took half of the difference (or two hundred fifty dollars) as he worked extra hard to save money for the insurance company. The company does not inform clients about any other recourse than accepting whatever the adjuster offers. Employees of the company who tell clients they can appeal the claim settlement to the Director of Insurance are likely to get fired.
It is possible to ask why anyone would tolerate such unethical treatment. Insurance companies tend to believe that intimidation and ignorance have intrinsic value. Clients who are confused or frightened enough don’t make claims or complain, even if they have the right to money. If you file more than three claims within a three year period for either your homeowner’s or auto insurance, your coverage may be terminated. Unexpected cancellations by companies can cause clients to scramble for insurance.
The majority of people won’t file three accidents claims in three years. Unscrupulous companies consider anyone calling customer service with an innocent question to be a damage claim in order to deter as many claims as possible. They claim that anyone who asks a question can have a damage claim. Statistics show that clients who ask questions are more likely to seek service and file claims. Time is money. The less customer service representatives and claims adjusters employed by an insurance company, the more profit they are losing on their salaries, retirement benefits, and health.
Most people view homeowner’s and auto insurance as something they hope to never need. What happens when clients need to move their business? They realize that they are wearing gold handcuffs. People who have their policy cancelled are often forced to purchase high-risk insurance, as no company wants customers who are more likely to be injured. They will pay three times more for high-risk insurance if they can find a company that will insure them. Some insurance companies will offer to insure clients who complain that they cannot afford to move elsewhere. They may also offer to take them back to their high-risk sub-company at slightly lower costs than other companies. The client now pays twice as much as they did before their coverage was cancelled.
Clients are less likely to switch insurance companies if they have other types of insurance with the same company. Profits depend on the continued flow of millions of premium dollars. It can be costly and difficult to cancel life insurance policies and add to IRAs or annuities.
It’s not a primary concern to lose a client in life insurance. The company is free from the obligation to pay out thousands of dollars in funeral benefits and they don’t have the responsibility of refunding all premiums paid over the years. Annuities and IRAs, however, are a different matter. To maximize their clients’ income, insurance companies invest a significant portion of annuity capital. To encourage clients to keep their policies in force, companion discounts on homeowner’s and auto insurance premiums are offered. Even those who are paying high-risk insurance can benefit from this incentive to keep their policies.
The iron key that locks the golden handcuffs: Policyholders are afraid to file any claims, as it would cost them more to move their business elsewhere. They will continue to pay their premiums, hoping that they don’t have to file a claim. The company will also have to pay less bonuses to accident claim adjusters because so many clients are not making claims. This is a lucrative business that enslaves clients with its own money and intimidation.
How can you avoid being scammed by insurance companies? Here are some tips. Be educated! Read all your insurance policies carefully. Discuss your coverage with your agent or customer service. Find out how claims are handled and defined. Seek out competitive bids from other companies and details about claims. If you have any dispute with your insurance company, call the Department of Insurance in your state. It could be crucial for your financial stability. Remember, your insurance company’s reputation is not known until you file your first claim.
