The “Insurance Hoax” — Insurers Paying Too Little and Too Late

Bloomberg recently published a hard-hitting piece decrying the property-casualty industry’s claims-handling practices. Insurers perceive that the article to punches below the belt, as this response from the Insurance Information Institute shows. The III piece is interesting to me because of its immoderate tone, something at odds with most of the writing that comes from III, which is a great source of financial statistics in particular on the performance of the P-C insurance industry. While the III is certainly right that insurers pay claims every day, the III and the rest of the industry need to recognize the wide-spread perception that at the point of claim insurers adopt an adversarial posture. Experienced, thoughtful observers of the industry have written about this at length (and the linked article is I think the most important thing ever written on the P-C industry), and the point of first-party insurance bad-faith law in part is to counterbalance the power imbalance that insurers hold over their insureds at the time of claim — at the time their insureds are most in need and dependent on their performance, which explains the emotional oomph that typifies through-the-eyes-of-insureds’ reporting on insurers’ claims-paying (or claims-denying) practices.
I agree with the III that the Bloomberg story is too facile, and it is inappropriate to leap from the observation that an insurer paying less than what the policyholder wanted ineluctably means that the insurer is paying less than what the policyholder deserved. I recently suffered a major homeowners’ loss when a (crazed) intruder broke into my home and caused huge amounts of damage; our insurer was fantastic in dispatching someone to board up a broken door, arrange for a contractor to do repair work, and reimburse us for other loss (including paying the vendor of our choice on some home electronics). So I know first hand that insurers can ride to the rescue, treat their customers with “good hands,” and live up to their advertising slogans. On the other hand, I bring suits against insurers on behalf of clients when I think amounts are owed and unpaid, and I am kept busy by wrongful denials by insurers inflicted against my corporate clients (both large and small). At a time when respected news outlets like Bloomberg (and CNN and PBS) feel comfortable producing pieces that seem well suited to the Fight Bad Faith Insurance Companies website, the insurance industry should look deep into its practices and understand the perceptions of consumers and businesses to ensure that insurers’ historic mission of helping their insureds, being “there” in the time of need, is embraced and, more importantly, put into practice every day in paying claims.

6 comments on “The “Insurance Hoax” — Insurers Paying Too Little and Too Late

  1. Marc, I read your article with much interest. I am involved in the preparation of insurance claims for insured’s in Australia. I wholeheartedly support your conclusion that Insurer’s need to embrace the philosophy that they “be there” in time of their client’s crisis to the extent that the insurance contract allows. I have seen many examples where this has occurred. Unfortunately I have also seen some situations where it has not. I suspect in some instances a negative attitude has developed as Insurer’s and their representatives have seen many claims where the Insured has not been completely truthful and they have become jaded, cautious and too ready to deny. I suppose this is human nature. Insurers and their representatives need to work hard to consciously resist this attitude and always approach an Insured with the benefit of the doubt. The Insured is the reason they exist.
    Regards – Joe

  2. The perception of an “adversarial posture” on the part of the insurance claims adjuster is widespread alright. It’s a constant PR battle the insurance industry must fight. My own experience has been that quick considerations are given to break-in situations–every detail covering the area of safety are thoughtfully attended to. But, close-to-the-vest haggling does occur all around the fringes. A must, I suppose, if the industry is to survive in this day and age of the trial lawyer onslaught against it.

  3. Yeah, we had some major trouble getting our insurance claims paid recently.
    The real issue is that it will always be in the companies best interest to make it difficult. Unfourtunately that tactic work well on so many people, so untill people are informed, the large companies will continue to make that their policy!
    James

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