8 Things You Should Know About Insurance Companies

1) Insurance is a “For Profit” Business

Insurance companies receive your premiums on a monthly basis and send you “friendly” reminders if you forget to pay on time. In the event that you do not pay, the insurance company unilaterally terminates your agreement with them. Their goal and business is to pay out less in claims than they receive in premiums. The higher the amount of premiums they receive and the smaller the amount of claims paid out, the greater the profit margin. “Insurance” is a self-serving industry where insurance companies directly control their risks and in many aspects, their profit margins.

2) The Insurance Adjuster Works For the Insurance Company

The insurance adjuster is the person who determines how much and when your claim is paid. The insurance adjuster is not the same family friend that sold you your insurance policy. They work for the insurance company, and their primary allegiance is to their employer, not you. Again, the insurance industry is a for-profit business.

3) Settlements are Permanent and Final

A settlement of a personal injury claim is permanent and final. Even if additional symptoms and expenses are incurred, the majority of all settlements require a global release releasing the responsible party and ultimately the insurance company from any future liability or obligations to the settling party. There are certain situations where settlements may be set aside, but they are rare and difficult to accomplish.

4) Insurance Companies are Not Required to be Truthful in Negotiations

Many insurance companies will tell injured people that their claim is only worth a fraction of what the true value is. They further represent to the person that their offer will not get any better even if an attorney is involved. These representations are designed to convince the injured person to settle their claim for an amount that is a fraction of what the true value may be. This is considered fair negotiation tactics which many individuals succumb to when attempting to negotiate with the insurance companies by themselves.

5) Insurance Companies Pay the settlement or Verdict—Not the Individual Being Sued

When you file a lawsuit or make a claim for injuries suffered in a car accident, in almost all cases the person’s insurance company pays your damages, not the individual. This is the whole reason the law requires insurance before a vehicle can be operated on a public highway. While the individual may be named in the lawsuit, the insurance company is bound by way of the insurance contract to defend and ultimately pay any damages awarded within the contracted for limits of coverage. Insurance is a written contract.

6) Insurance is a Written Contract

Insurance is a written contract between you and an extremely wealthy and extremely sophisticated corporation. The terms of the contract or insurance agreement that you enter into dictates what is and is not covered by insurance. Everyone should have a copy of their insurance policy along with the terms and conditions thereof and the limits available under the policy.

7) Insurance Companies and Hospitals work Together to Lower Each Others Costs

Many insurance companies have now begun contracting with hospitals to pay medical expenses of their insured at amounts lower than what is billed by the hospital.

8) Insurance Premiums are NOT Increased Because Frivolous Claims Result in Unjustified Verdicts

Frivolous claims do not result in multi-million dollar verdicts despite the insurance industry’s attempts to persuade the public otherwise. An attorney is not permitted to advance a case that is frivolous, and there are pretrial procedures that permit judges to dismiss claims that are without merit. Most importantly, if a case does get to the jury, no jury is going to find liability exists or award damages if not warranted. Juries are not stupid. If a jury awards multi-million dollars in damage chances are the offending party was unquestionably wrong, and the injured individual is severely and permanently injured if not dead.