There are many insurance companies we can choose from. We all see their commercials everyday that concentrate on trust for example, “You’re in good hands” or “Like a Good Neighbor”. Insurance Companies make money by collecting premiums from us, the consumer. Do you know what tactics insurance companies use that will increase their profits? What do they not want you to know? How do they get the most money possible from you and keep it. Here is a list of the insurance industries’ 10 dirty little secrets:
1. Ratings are used but consumers are not allowed to see them
ISO, a New Jersey-based company, provides information to car insurance companies about the likelihood of certain models of cars being involved in accidents and how severe those accidents will be. A company press release states that its’ rating plan leads to surcharges of up to 25% for some cars. For other cars there are discounts of up to 20% against the insurance rates. This service looks at nearly 300 makes and models of vehicle.
This information would be useful to consumers to use when buying a car whether a safer car or to keep car insurance rates down. Unfortunately, these ratings are not available to the public. How easy would it be to put these statutes on a new or used car sticker? I would love to see them the next time I buy a car.
2. FICO risk scores are used but cannot be seen
An insurance risk score developed by FICO is used by insurance companies to help determine what to charge consumers for auto insurance. You can get a copy of your FICO credit report you cannot get or see but the insurance risk score. I didn’t know I was charged based on my credit history! Even worse the insurance companies own interpretation of my credit history.
3. Proprietary software might be used to shortchange you
Information about your injury after a car accident can be fed into a computer program called Colossus, TEACH or SMART. These programs are used to generate settlement offers for bodily injury claims from motor vehicle accidents. The Consumer Federation of America warns that chances are better than average that this software is rigged to keep offers low. In other words, as others contend, the software is “tuned” to lowball injury claims. As a Kentucky personal injury attorney I have reviewed documents that show that settlement dollars paid have decreased substantially since insurance companies began using computer programs to put values on injury claims.
4. They know if your attorney is a wimp
Insurers have better sources of information on this topic. In evaluating the value of bodily injury claims, Colossus evaluates the attorney who’s representing you. Defense attorney says that insurance companies want to find out if your attorney is likely to roll over for an inferior settlement offer – or has the backbone for a courtroom fight. Your attorney makes a difference.
5. Insurers sneak percentage-based deductibles into your police
According to the Lawyers.com website, a renewal contract could have a $1,000 deductible for fire losses include or up to a 25% deductible for hurricane damage in some high-risk areas. That 25% can translate into significant dollars out of your pocket and significant savings for the insurance company.
Percentage deductibles may be necessary to provide coverage to storm-prone areas but homeowners must review on the insured value of their property whenever they make improvements. Look at your renewal policy to make sure there have been no changes.
6. Pottery Barn items might be replaced with Wal-Mart
Insurance company adjusters often dispute the value of furniture, jewelry and other items lost in a flood or fire. They might offer discount-merchandise prices or the current value rather than the true replacement cost. Insurance companies might also try to wear you down with lowball offers by switching adjusters and forcing you to start the process over again. Keep all your receipts so you can prove where you bought an item and the real value of it.
7. They make hospitals charge smaller insurers more
If you’re not a Blue Cross customer, you may end up paying more in premiums. This is because your insurance company did not negotiate a deal with a hospital or doctor before Blue Cross did. Officials say that in some cases, Blue Cross required hospitals to charge other insurers as much as 30% to 40% more than they charge Blue Cross. Ask what the negotiation prices are when shopping for insurance.
8. They force you to buy a more expensive homeowner’s policy
In some cases, the deck is stacked against a consumer who seeks affordable insurance. Homeowners who fall behind in their home insurance payments are penalized. Mortgage lenders may obtain another insurance policy and bill you for it under your mortgage agreement. Then you are stuck with force-placed insurance.
9. ‘Preferred providers’ may cut costs without telling you
Insurance companies may refer you to ‘preferred providers’ for remodeling work when your home is damaged. These providers are usually contractors who have an ongoing business relationship with the insurer.
In cases like this, the insurance company gives you a check based on the estimate the insurance company gives you. They want you to take the claim money the insurance adjuster sets aside for repair and hire your own licensed contractor and to be in control over the process. Sometimes you can’t get the work done for this amount.
10. They do not contact your beneficiaries when you die
Insurers use a Social Security file called “Death Master” to cancel a life insurance annuity when a policyholder dies which will benefit the insurer. Millions of dollars remain unclaimed since insurance companies did not contact beneficiaries of the policies after the death of the insured member because the policy was cancelled.
This is alarming, isn’t it? Insurance companies create the perception that they will do anything to please the consumer. They allow customers to pay more while smiling and knowing they have hidden agenda that will benefit the company’s personal interest and pocket book. Be informed on the process. Ask the right questions so you can get the insurance coverage you need to protect your family, and a good value.