Unfortunately, we all need insurance. You would be an idiot to go into business
without a full array of insurance to protect you from some sort of catastrophic
event – property, workers comp, fire, flood, business interruption, liability,
car, etc., etc.
If you are like me, you don’t want to dwell on this topic,
so you find an insurance company, sign up and forget about it…. hoping that it
will be there if you need it sometime in the future.
Insurance companies rely on your doing just this; they know
that once you are covered by a company, you are unlikely to look around for
better prices when the renewal comes up the following year. It is
a big time suck to find another policy, get bids, fill out the paperwork, etc.,
etc. And they take full advantage of this.
A couple years ago, I had State Farm insurance for my
cars. I noticed that from year 1 to year
2, my rates increased by 10%. I know
things happen and sometimes insurance companies need to take a big increase,
but I assumed that would just be a one-off event and subsequent years would be
stable. Besides which, my three cars were costing me
about $1400 per year, so 10% increase was only a $140. This was hardly worth
the large time commitment it would take to find an alternative. The next year, I just signed on without
looking at the increase. And I did it for the next year as well
(Stupid!!!). On the fourth year, I took
another look at my auto insurance rates, and to my astonishment, I realized
that my rates had increased over 50% in four years!!! Keep
in mind that I had not had any moving violations nor accidents during this time;
it was just arbitrary increases. I was
now paying $700 per year MORE than I was before…. for NO reason!! I called my agent to find out why my rates had increased so much, and she just mumbled something about how the entire 'Insurance Pool' had been very expensive over the last several years, so they had to increase everyones rates to compensate for the increased payouts... BS.
Not six months later, I was looking over the renewal
paperwork for my Workers Comp insurance with Travelers Insurance Co.
Similar to my driving history, I had not had a single claim on Workers
Comp in years. It was not a huge cost
(~$2500 per year), so I had just signed the renewal each year,
assuming that since I had not had any claims that my policy would stay about
the same. Stupid! Stupid! Stupid! I pulled up my paperwork from previous
years and discovered that my insurance had gone up 20% from the previous year
and an additional 22% from the year before that!! We
were now talking about some serious money!
So, I learned; this is how insurance companies operate. They drop their initial sign-up rates nice
and low to attract people in, then take large price increases every year,
hoping (assuming) that people will either not notice or not care enough to
change. This adds up pretty quickly.
This is not the only way insurance companies are sneaky;
they also try to figure out some way to avoid paying out (or reducing the
amount paid out). My catering car was
stolen a couple years ago, and State Farm just cut me a check for
the value of the car and sent it to me.
I took one look at it, and it became clear that it was nowhere near the
actual value of the car. They had
low-balled the valuation with the hope that I would not try to fight for the
additional $1000. When it became clear that
I was planning to fight for the true value of the car, they came up with an
array of documents they needed to show the actual value of the car. As it
happened, these documents were going to be rather time consuming to
produce!! So, in making the process
time consuming and difficult, they were hoping I would give up and just take
what they gave me.
So, what to do?
There are three things to do to avoid being taken advantage
of by insurance companies:
1. 1) Use an insurance broker; a good insurance broker
is invaluable. He/she finds good
insurance policies, reputable companies, comparison shops and gets the best
deals. He/she also helps figure out
what policies would be best for what you need and will fight for you to be
appropriately reimbursed if/when you need to make a claim. You will most certainly get a better deal. Yes,
the broker will bump up your policy by a certain percentage, but overall you
will probably end up paying less because your broker will find you the best
deals.
2. 2) Scan your insurance documents into the computer
when you get them; this makes it very easy to look up what you paid in the
previous year. I use a NEAT scanner to scan all documents into my computer. When it comes time to compare year on year pricing increases - having all the scanned documents together on your computer makes such comparisons a breeze.
3.
3)Take the 5 minutes it takes to see how much your
rates are increasing from year-to-year.
If they are increasing more than inflation, call your broker and ask him/her
to investigate why your rates are going up.
Just being a pain in the butt to the insurance company is often enough
to have your rates dropped back down. If
they don’t drop their rates, then you can ask the broker to do some comparison
shopping and find an alternative policy.
So he/she will do all the work for you!
Good luck with insurance!!
In researching this blog, I came across this document (The Ten Worst Insurance Companies in America) that named and shamed the top ten WORST insurance companies (look! my nemesis State Farm is on there!) Enjoy:
1. Allstate
2. Unum
3. AIG
4. State Farm (die die die!)
5. Conseco
6. WellPoint
7. Farmers (I've had these guys as well!)
8. UnitedHealth
9. Torchmark
10. Liberty Mutual
Here is a quote from the report:
Profits Over Policyholders
But some companies have discovered that they can make more money by simply paying out less. As a senior executive at the National Association of Insurance Commissioners (NAIC), the group representing those who are supposed to oversee the industry, said, “The bottom line is that insurance companies make money when they don’t pay claims.”7 One example is Ethel Adams, a 60-year-old woman left in a coma and seriously injured after a multi-vehicle crash in Washington State. Her insurance company, Farmers, decided the other driver had acted intentionally and denied her claim, contending that an intentional act is not an accident. Another example is Debra Potter, who for years sold Unum’s disability policies until she herself became disabled and had to stop working. All along, Potter thought she was helping people protect their future, but when her own time of need came, she was told her multiple sclerosis was “self reported” and her claim denied—by Unum, the very company whose policies she had sold.
In cases like these, and countless others, the name of the game is deny, delay, defend—do anything, in fact, to avoid paying claims. For companies like Allstate, there are corporate training manuals explaining how to avoid payments, portable fridges awarded to adjusters who deny the most claims, and pizza for parties to shred documents.
(as an aside, I now use Progressive - I've been very happy with them.)
Please join in the conversation! What would you like to hear about - what issues are most important to you?
-Duncan
The Coffeehouse Guy
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