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Insurers, Claims, and How They Affect Policyholders

Posted on: September 3, 2022

Chi Nguyen
September 3, 2022

Insurers, Claims, and How They Affect Policyholders

The simple truth is that insurance policies are nothing more than a company choosing to allow the transfer of risks in exchange for dollars from Policyholders. Insurance companies estimate that assuming the risk of disaster on behalf of their clients can be a lucrative field because they believe the majority will not need their services. As long as they can keep their loss ratio positive (the ratio between the amount of earned money and the amount of losses paid out by the company) they are making money and earning a premium living.

Insurance companies can remain profitable while still having high loss ratios, though. This is because there can be a substantial amount of time between the time the premium is collected and the time the future payouts have to be made. Insurers typically have plenty of capital and liquid assets available, which means that in between profits and payouts, they’ll be able to take advantage of investments and other financial gains that will keep them afloat and busy for another year to come.

Insurance companies can be hard to deal with. Their policies aren’t always easy to understand, and if you experience an accident or disaster, you may find yourself in the middle of a dispute with a corporation that doesn’t care about your physical, mental, emotional, or financial health. On top of this, you may feel like you’ve been deceived by the insurance policy your insurer gleefully sold to you. This is supposed to be an investment that helps you feel safer during your drives, but at times, it can turn into a months-long litigation process.

There are so many aspects of the insurance industry that customers aren’t aware of. And because of this, many of them are completely blindsided when they learn their company won’t be there to save them when disaster strikes their lives. In this blog, we’ll go over some of the common components of insurance claims, how insurers handle them, and how this affects you, the policyholder.

Insurance Claims Manuals

Insurers use claims manuals to lay out the guidelines associated with claim submission, denial, and payouts. Many insurers use these manuals to lay out the day-to-day handlings of claims and other internal matters. However, many insurers have stopped using formal claim manuals because it can be used as evidence against them in the event of a “bad faith” case. However, don’t be too alarmed. As a policyholder, if you choose to pursue a bad faith insurance case, your insurer will still be forced to prove they have properly conducted business.

Learning more about claims manuals is a great start towards achieving a greater understanding of how insurers move, think, and behave. Below, we’ve outlined a few of the key items that are typically found in claims manuals. Policyholders who are aware of these provisions may find it easier to stand up for themselves and fight for their rights if they ever find themselves in the middle of a dispute with their insurer.

The forward is a commonly found introductory section that is contained in most insurance claims manuals. Forwards are typically put in place for two main reasons: determining whether the claim presented is covered by the insurance agreement located within the police, and liability costs. Insurance companies don’t like paying the full amount of a claim, so the liability section of the manual allows them to layout

Dealing with a claims department can be extremely frustrating as a policyholder. The claims superiors typically act as both judge and jury during claim disputes, and unless you choose to take them to court, they will have the final say on what happens with your insurance policy. They are the ones who decide which claims are accepted and which ones are denied. They are also the ones who decide how much of a claim will be paid out. Needless to say, claims departments hold a lot of power in the world of American insurance.

For these reasons and more, companies usually have regular audits and reviews of their claims files in order to determine if they are all being taken care of properly, ethically, and swiftly. If it is determined that a specific department is not paying enough money out for legitimate insurance claims, senior management will be quickly alerted and a local claims manager will be forced to intervene.

Statements are an essential aspect of any insurance claim file. In the world of insurance, a statement is a written, oral or recorded testimony that is derived from either the claimant or insured visual. As the backbone of the claim, statements are extremely valuable, and they are rarely overlooked or undervalued.

Statements are also taken from eyewitnesses who may not have been directly involved in the incident in question. At times, insurance companies may bring in independent witnesses to secure a “negative” statement that paints the policyholder in a bad light. Negative statements are defined as any statement made by an individual whose testimony is purposely detrimental and/or false.

Statements should typically be taken immediately after any sort of incident or accident takes place. Memories can be fleeting, and every detail of an insurance claim is important to its outcome. Because of this, you want to ensure you have a statement on file as quickly as possible. If you find yourself in an accident and you are unable to record an official statement, experts recommend using your smartphone to quickly take notes or record a voice memo with some of the details of what just took place.

Key Elements of Insurance Statements

Identification – When making your statement, first include your name, age, gender, address, license plate number, and driver’s license number. Any other identifying information such as your employment status, income, tenure length, and emergency contact should be recorded as well, if at all possible. These facts may be useful if you must enter a court of law to fight for your claim.

Scope of Accident – The scope of the accident includes the time and location it took place, in addition to the date and day of the week. In addition to this, try to record information about the directions in which the motorists were travelling, as well as their departure time and ETA (estimated time arrival).

Description of the Accident Scene – The details of the collision must be noted, but the environment surrounding the accident must also be taken account for. In your recorded statement, be sure to include details including the weather, street conditions (potholes, wet roads, excessive gravel, etc.), street type (highway, residential road, freeway, tollway, etc.). If possible, experts suggest also pursuing further details such as visual impairments, right-of-way regulations, and speed limits. All of this information can help you negotiate a higher settlement amount or provide additional ammunition in the event your case goes to trial.

Facts of the Accident – The key events of the accident are essential to your statement. When describing the facts of the accident, you need to make sure you mention the names of all drivers, directions of travel, and other miscellaneous aspects of your event such as stop sign placements.

Reported Bodily Injuries – Who was injured during your accident, and what are the extent of the many injuries? Was anyone in need of medical assistance, and if so, were they immediately taken to the hospital after the accident? Who was the physician providing treatment, and what type of medical treatment was given to the patient? These are all questions that your statement needs to answer.

Property Damage – In addition to recording the year, make, model, color, and mileage of your vehicle, you need to make sure that you are able to provide a clear and concise picture of what took place. Record the damages of the vehicle, an estimate of the repair costs, and any other personal belongings that were damaged or broken during the crash.

Affirmation – Whoever is providing the statement must be willing to swear by their word. Upon completion of your statement, make sure you are ready to fully attest to the validity and trueness of the message you have just provided to your insurer. And if your insurance claim winds up in a court of law, be ready to the same thing in front of a judge and jury.

This can all seem like a lot of information, and we know it can be cumbersome to start recording and itemizing your accident immediately after a collision. However, we cannot stress enough how much this can help you if you need to take your matter to the highest level. Every bit of information matters, and the more diligent you remain about your claim, the higher likelihood you have of a successful outcome.

Misinformation from Insurance Representatives

We’ve seen this in every industry: the overzealous salesman. At times, insurance agents will make grandiose promises that will be much more extensive than what the actual policy states. At some point, you may find yourself dealing with an insurance agent who is overselling you on policies, benefits, and other reasons why you absolutely need to sign up for coverage today. When this happens, it can throw a wrench in the plans of the insurer and policyholder alike. Sometimes, you will be able to convince the company to honor their word, but in other cases, you will not be so lucky.

When insurance agents face accusations of committing errors when issuing policies to their customers, the insurance agent will typically be judged against the pre-agreed upon duties, responsibilities, and details of the agency agreement at its outset. In cases such as these, the managing general agent is not responsible for the policy’s underwritings. If a claim is made under the policy, it is up to the insurer to conduct the proper investigation in order to determine what the actual policy terms are.

Insurance agents aren’t the only ones who mislead customers and clients, though. In addition to this, many insurance companies are directly responsible for false promises due to their advertising choices. Though the job of an advertising department is to distribute promotional materials and secure commercial placement, it is the insurance company’s job to supply the marketing department with accurate, honest information. Individuals who find themselves dealing with false advertising need to make sure they locate any sort of brochures, flyers, commercials, or promo material immediately. If you are able to prove that you’ve been falsely advertised to, the company will generally honor the literature.

Reservation of Rights Letter

The reservation of rights letter is created by insurance companies to let their clients know they may not receive full benefit payments under their current policy. Insurers want their customers to be aware of the fact that there are policy limitations, exemptions, exceptions, and other clauses put in place within their policy that may potentially bar them from receiving certain payouts. This also helps the insurer avoid any sort of potential legal repercussion from not paying the full fine. Policyholders won’t be able to seek a lawsuit if they received ample notice of the possibility of not getting a full payout on behalf of their claims. The typical reservation of rights letter contains the following elements:

  • A written acknowledgement letting the insured know their claim has been successfully submitted and received
  • A description of the claim in question
  • Any sort of necessary clarification the policyholder has requested from the insurance company
  • Any sort of necessary clarification in regards to the policy’s details, benefits, and exclusions
  • An overview of the insurance policy

In general, insurance companies must give their client a reasonable amount of notice time as well as clearly outline what the potential problem is. This provides the policyholder with ample time to dispute the necessity of the Reservation of Rights letter while also giving them an opportunity to begin collecting evidence, facts, and information that insurance company may have missed or mistaken.

Proof of Loss

The proof loss of statement is seen as what initiates the claims process. When presenting this statement, the insured individual provides information regarding their property losses. At the end of the document, they will typically be prompted to declare the form’s honesty and accuracy. Insurance companies may threaten jail time or excessive fines if a client is found providing false information.

In many states, insurance companies can be sued for bad faith practices if they require one of their clients to use the company’s proof of loss form as a prerequisite for a claim’s payment. In addition to this, it is considered to be an act of bad faith to delay a claim investigation by forcing a client to provide a preliminary claim report in addition to the formal Proof of Loss form. These two forms are essentially the same things, and insurers typically do not need both of them in order to proceed forward with a claims investigation.

If an insurance company chooses to reject or deny a proof of loss statement provided to them, the insurer must provide a valid defense to their client’s claim, either using a contract defense or a policy defense. In these defenses, the insurance company must be able to give a clear and concise statement that helps all parties clearly understand each other’s positions.

Claims Department Tendencies

No two insurance companies will have identical claims departments, which means that payment policies will differ. Typically, the more profitable the insurer is, the more inclusive their benefits will be, and the more generous their settlement offers will be. Also, keep in mind that newer insurance companies are typically more willing to pay claims in full. This is because their incoming revenue greatly outweighs the initial claims being submitted. Also, newer insurers are typically trying to find a way to establish a good rapport and market share. Providing generous payouts for customer claims is typically a good way to accomplish that.

On the other hand, you must be aware of the insurance companies who are in financial turmoil. Insurers who have poor financial health are only concerned with their bottom dollar, which means they usually could not care less about providing full, sufficient, and fair payouts for their customers’ claims. These insurers typically do their best to nickel and dime their clients until it is time for them to finally pull out of the market and look for new opportunities elsewhere.

What is a Questionable Claim?

Questionable claims typically arise when one of two things happen:

  • A customer purchases an insurance policy that has been misrepresented by an insurance agent or representative a customer purchases an insurance policy and attempts to submit a fraudulent claim.
  • A policyholder attempts to submit a fraudulent claim under the coverage of a valid insurance policy

In the event the latter takes place, it is not always a black and white issue. At times, fraudulent claimants may use legitimate claims to receive fraudulent benefits. For example, an individual attempting to submit a fraudulent claim may be involved in a real car accident, but if they attempt to support their claim with bogus itemizations, injuries, and other losses, their claim will be made immediately questionable.

The majority of America has adopted laws referred to as “immunity statutes”, a statute that allows an insurer to report any questionable or potentially fraudulent claims to their local, state, or federal authorities. Below are some of the red flags insurance companies look out for when determining the validity of a claim.

  • Recent, multiple purchases of insurance policies by a single person
  • Reports of large cash losses
    High value stolen property, such as jewelry, large lump sums of cash, and rare materials
  • Substantial difference between the losses reported to the insurance adjuster and the losses reported to local authorities
  • Inconsistencies and discrepancies between the policyholder’s income and the total value of the lost, itemized property
  • Excessive demands for a swift and lofty settlement payment
  • Property losses/damages that occur briefly after the beginning of the coverage date, or right before the policy’s expiration date
  • Incentive/motive for revenge (most common in property insurance disputes)
  • Claims that are reported weeks and months after the incident in question has taken place
  • Unusual and/or suspicious behavior or conduct shortly before the insurance claim

Pusch & Nguyen | San Antonio Accident Lawyers

At the end of the day, the insurance industry is made up of companies who are making a profit by selling peace of mind to their customers. So many policyholders never have to make a claim, but many of them would refuse to ever risk going without an active insurance policy. But even if you never get into a car accident in your life, you deserve to know exactly what you’re paying for your insurance coverage, and exactly what you are getting out of the policy. Never let your insurer disturb your peace of mind. If an insurance agent or company ever makes you feel confused or unsure of your policy, we encourage you to do what it takes to gain clarification.

We hope this information has helped you learn a little more about the inner operations of insurance companies and how they handle the claims that are submitted to them. The best thing a plaintiff or injury victim can do or themselves is to learn more about the laws, rights, and legal processes related to their accidents.

Dealing with your insurance company can be such a headache if you find yourself in the middle of a settlement negotiation or trial. Are you trying to secure your financial recovery after experiencing a car accident, but your insurer is hesitant to properly compensate you? If so, we can help.

The Pusch & Nguyen Law Firm has helped countless Texans handle their insurance disputes. Our experienced trial lawyers have gone up against some of the biggest names in the insurance industry while successfully bringing home payouts for clients. Our successful reputation speaks for itself, and with offices in both Houston and San Antonio, we are well equipped to assist Texans who are in dire need of our services. Call us today at 713-524-8139 (Houston) or 210-702-3000 to schedule an appointment with a member of our team.

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