Today, insurance isn’t a shared community environment, but instead a multi-billion dollar a year for-profit industry. Though insurance serves one singular purpose – to minimize the financial loss to the policyholder if a covered event happens – insurance companies are increasingly trying to minimize the risk to their own bottom lines at the expense of their policyholders. They consider the risk of paying claims as a cost they can reduce, just like decreasing wasted ink and paper around the office.
This distorted view of risk means that policyholders across the nation are paying ever-increasing premiums for ever-decreasing actual coverage, with insurance adjusters fighting every step of the way when they try to make a claim. As policyholders of any type of insurance, we’re paying for a promise, but more and more, the companies that make us these promises are trying to wriggle out of paying, even when they have no legal basis to do so.
In auto insurance policies, the cost-cutting perspective is especially widespread, leaving both policyholders and third-party claimants in sometimes dire situations. Photo credit: Flickr (Creative Commons license).
The Insurance Industry and the Civil Justice System
In the real world, bad things happen, no matter how many regulations or laws we put in place. People get hurt in car accidents. Shoppers slip and fall in retail stores. Dogs bite guests at private residences.
These things happen, not because they are unpreventable, but because the people in charge of preventing so-called “accidents” are only human. They make errors and mistakes. Drivers get behind the wheel but don’t give the act of driving their full, unimpaired attention. Businesses that own or use property neglect to keep the premises free of dangers like spills and uneven flooring, maybe because they are understaffed or because company culture places higher priorities on other tasks. Dog owners are too blinded by affection for their pets to remember that Fido is still an animal and retains animal instincts that even the best training can’t extinguish completely. Someone is at fault for these events, but as a society, we have recognized that an individual is often unable to fully compensate the victims of their mistakes.
Because bad things happen to blameless people and those bad things aren’t always easy to fix, two entities are available to help victims of accidents. We have a legal system that recognizes civil justice cases. And we have this concept of insurance, that form of risk management that began as helpful community cooperation.
No matter how vigilant you are about maintaining your auto insurance or how confident you are that your company would never rip you off, none of us can be 100 percent sure that our insurance companies will pay what they owe us in the event of an accident. Photo credit: Flickr (Creative Commons license).
These two entities are supposed to work together. In the insurance industry, what is supposed to happen is that an injured victim makes a claim against the insurance company of the party who is at fault for the accident (or, in some instances, his or her own insurance company). The insurance company then investigates the situation fairly to understand who caused the accident (liability), whether and to what extent the accident is covered, and what damages the victim has suffered. Finally, the insurance company pays what it owes to the claimant.
Suppose that, for some reason, the insurance company representative handling the claim – typically known as an insurance adjuster – and the claimant simply can’t come to a resolution. In that case, the claimant hires an attorney, and the claim reaches a phase called litigation and enters the legal system as a civil lawsuit. The case is heard, reviewed, or otherwise considered by professionals within the legal system and an amount of damages to be paid is determined fairly through a form of resolution, such as in arbitration, by judge, in a jury trial, or through mediation.
At least, that’s how the insurance industry and the legal system are supposed to work. Just as people make mistakes, systems and protocols break down, especially when there is a huge incentive – like billions of dollars’ worth of profits – for entities like insurance companies to alter their business practices.
Failures in the System Affect Us All
If you have ever been a claimant, there’s a good chance that you have seen firsthand how far the ideal insurance company interaction is from reality. That’s because, in the past few decades, the insurance industry has undergone a massive transition. Hostile adjusters, lowball offers, and hardball negotiation tactics are no longer rare occurrences, but instead systematic changes in the industry. And these changes impact every individual and every business that purchases insurance, from the direct harm they cause to claimants to the subtle (but real) effects they have on the way the general populace views personal injury claims and the people who make them.
If you assume that many personal injury claims are frivolous, you’re not alone – and you have probably never considered that the people making these claims about frivolous lawsuits have an agenda of their own.
In the insurance industry as we know it, conflict of interest isn’t viewed as a problem, but a business model on which corporations with trillions of dollars in assets can further boost profits.