Mark A. SteinbergInsurance Laws For many people, insurance companies exist simply to provide peace of mind. People pay their monthly premiums for car insurance, home insurance, or life insurance and hope that they never have to be in a position where they need help from their insurer. However, the peace of mind comes in from the idea that should an accident and injury—or even death—occur, the insurance company will step in to help.
Unfortunately, it’s a regular occurrence for people with insurance policies to find that when the time comes, the insurance company decides it doesn’t have to provide coverage after all, despite regular monthly payments from a customer. This can be a confusing, vulnerable situation for people, which unethical insurers sometimes rely on.
Of course, there are valid reasons for an insurance company to refuse to pay a claim or even demand repayment of a claim that’s already been paid. Insurance fraud, especially in injuries, happens all over the world. People have successfully fooled insurance companies into paying out for false injuries, so these insurers are often paranoid about paying out for a false claim. However, in other instances, a legitimate accident victim may find that an insurer has decided not to honor a claim despite a real and painful injury. Sometimes, this is even for deliberate, malevolent reasons and may involve deception or distortion of facts and records to avoid paying a legitimate claim.
Intimidation Tactics
Insurance companies have years of experience dealing with their own policies and deciding when to honor a claim and when to refuse it. Unfortunately, that doesn’t always translate to the correct or ethical decision, and sometimes insurers exploit their position. They know, for example, that most people have little legal experience, especially with lawsuits. They also know that most Americans don’t necessarily have the “financial war chest” required to wage a long, drawn-out legal battle against a big corporation with an army of lawyers. Because of these factors, some less ethical decision-makers at insurance companies know that if they put enough pressure on someone complaining about a denial, the sheer legal force arrayed against such a person may make them buckle under.
However, just because an insurance company decides to deny a claim, that doesn’t mean the decision is final. And just because an insurance company has a significant legal mechanism buttressing it doesn’t mean that a win in court is guaranteed.
Experienced attorneys can help claim denials in various areas, such as personal injury, workers compensation, and even social security disability insurance. In some cases, such as with a personal injury or wrongful death claims, they work on a contingency fee, only collecting payment for legal services if they win the case or negotiate a settlement. Once an insurance company knows that someone has legal representation and even a willingness to go to court, the public nature of such a lawsuit is often something they would like to avoid, and negotiations—or even out-of-court settlements—can begin.
And of course, if it goes to court, you know you have an attorney in your corner.
As the insurance sector grapples with multifaceted challenges, identifying and understanding these risk factors is the first step in crafting a resilient strategy for the future.
A claim may or may not occur during the term of a policy. Even when the contingency covered under the policy does occur, the amount of the claim may be the full sum insured or less and in some cases, the amount may not be known for quite some time in the future.
On the other hand, insurance companies are risk-neutral, and earn their profits from the fact that the value of the premiums they receive is either greater than or equal to the expected value of the loss.
When providers disagree. Car insurance companies may disagree on which motorist caused the crash, which can delay the payout of your claim. When this happens, carriers typically negotiate between themselves to reach a mutually agreeable determination.
The property insurance sector is under heavy pressure from poor financial performance due to unexpectedly high inflation, a shift of exposures to higher-risk areas, and rising reinsurance costs.
The risks and uncertainties associated with insurance follow the life cycles of insurance coverage and claims. For example, prior to business being sold and claims incurred, there is uncertainty about the future mix of insureds or the types of claims that will be made.
Hence, a risk averse person will optimally buy full insurance if the insur- ance is actuarially fair. You could also use this model to solve for how much a consumer would be willing to pay for a given insurance policy.
An uninsurable risk could include a situation in which insurance is against the law, such as coverage for criminal penalties. An uninsurable risk can be an event that's too likely to occur, such as a hurricane or flood, in an area where those disasters are frequent.
An uninsurable risk is a risk that insurance companies cannot insure (or are reluctant to insure) no matter how much you pay. Common uninsurable risks include: reputational risk, regulatory risk, trade secret risk, political risk, and pandemic risk.
You can ask that your insurance company reconsider its decision. Insurers have to tell you why they've denied your claim or ended your coverage. And they have to let you know how you can dispute their decisions.
When an insurance company refuses to settle, it may be liable for the full amount of the excess judgment after trial, notwithstanding the lower policy limits. This duty of good faith aligns the insurance company's incentives with those of its insured.
The top five future risks for the insurance industry are cyber attack or data breach, climate change, weather and natural disasters, failure to attract or retain top talent and economic slowdown or slow recovery.
The business of insurance, which once was stable and predictable, isn't that way anymore. Growth without sacrificing profitability is challenging, climate change is irrevocably impacting certain risk profiles, distribution needs have become truly omnichannel and customers expect products tailored just for them.
Innovations such as home sensors, telematics and drone surveys have the ability to produce critical data to help businesses provide more personalized solutions and take better decisions in underwriting, pricing and claims adjustments.
Insurance policy costs have gone up steadily every year, from just over $1,000 in 2015 to almost $1,500 in 2021. "I think the home insurance industry is abandoning Californians who have diligently paid their premiums for decades," said Carmen Balber with Consumer Watchdog, an advocacy group.
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Mark A. SteinbergInsurance Laws For many people, insurance companies exist simply to provide peace of mind. People pay their monthly premiums for car insurance, home insurance, or life insurance and hope that they never have to be in a position where they need help from their insurer. However, the peace of mind comes in from the idea that should an accident and injury—or even death—occur, the insurance company will step in to help.