A friend mine, Jeff, called me recently to tell me he had been hit by a driver with cheap car insurance. It sounds like his family may have some pretty serious injuries. Despite being a career insurance agent, his question was “what advice do you have?”
My heart goes out to Jeff and his family. This is an awful position to be in. Fortunately, as an insurance agent, he’s smart enough to know he needs to take action immediately. Unfortunately, the insurance industry may prove to be as much a problem for him as a help.
Jeff called the right person. I know the dark side of the insurance industry inside and out. Yes, after being hit by a car, I was trapped in the dark side of the industry for years.
For you, the reader, your next step should be to figure out how good your car insurance is. It’s easy to do. Just click the button below for a free rating on your company.
What Jeff Needs to do
For Jeff, there is one very specific action he needs to take. He needs to find a doctor that will offer an opinion. This sounds obvious. After all, isn’t that what doctors do? They diagnose a situation then tell you what they think. Actually, That’s not the way it works. In reality, it can be difficult to find a doctor that will offer an opinion. Unfortunately, many people never figure this out, and it costs them dearly.
Many doctors (especially those employed by hospitals) only provide reports. Reports tell what they saw and what they did. However, being fairly compensated for your accident requires more information. Information such as, what are the long-term consequences? Will this problem require surgery or multiple surgeries? Will other types of treatment be necessary? Is the injury debilitating in some way? And most importantly, was the problem caused by the accident? The only expert that can convincingly make these important points is the doctor. Unfortunately, hospitals and many doctors, have policies against providing information that could be considered an “opinion.”
For me, the main reason – possibly the only reason – the insurance company paid what was due to me was because my doctor said I would probably need a replacement hip as a result of the accident. At that point the fight was over. The insurance company lawyer stopped spreading untrue information (lies) about me. Instead, they began the preparations for sending the money they owed to me.
Here’s the issue. It’s not possible for drivers to know the actions to take following a serious accident. Therefore, they turn to the experts. Unfortunately, many of the experts are conflicted. Insurance companies don’t want to pay claims. Lawyers want to make a lot of money. Doctors don’t want to upset insurance companies that directly or indirectly pay a large portion of their income. The list goes on. I’ve learned over my six plus years of working to bring transparency to the insurance industry that this an industry fraught with conflicts of interest. Worst of all, the conflicts are institutionalized. This is the reality of what consumers face when dealing with insurance matters.
What this all means is that the consumer has to watch out for themselves. Few others care very much about the consumer.
Fortunately, there are good people out there that do care. At ValChoice, we work day in and day out to find these good people and highlight them. Unfortunately, most people care more about their paycheck. That’s just reality. I know Jeff didn’t want to hear this. However, it’s true and needs to be said.
If You’re Hit by a Driver with Cheap Car Insurance
I won’t cover the whole list of items of what to do. There are many lists like this readily available. However, most are incomplete. Most come from lawyers that want to sell services, or an insurance company that wants your business.
Instead, I will give a shameless plug. Buy my book, Injured Money. This book was written for consumers. Here’s proof of how valuable one consumer found the book,
“Not only should every driver read Injured Money, but after reading it he/she should stow a copy in the glove box.”
This was more than a nice, handwritten, thank you note. This thank you note was written on a hand painted thank you card. The card had been painted by the fellow that rad the book. That was a touching to tribute indicating what we’re doing at ValChoice is helping people.
A Fundamental Problem with the Insurance Industry
Some companies specialize in selling based on price. These companies almost exclusively sell minimum limits policies. This means when their insured driver causes an accident, they’re only liable for the state required minimum. If the victim of the accident also had a minimum limits policy, they’re out of luck. Too bad. Everybody met the legal requirement of having insurance, but the insurance didn’t piece anyone’s life back together.
If the victim was a responsible person and had adequate insurance, their insurance company will need to pick up the costs. If you believe that all companies willingly pay large losses, I have a bridge I would like to sell you.
Here’s the structural problem for the insurance industry. All companies have to be price competitive, even the good companies. After all, billions are spent on advertising telling us that price is all that matters. Think about the ads: You can save x%, or most drivers save $y, etc. However, when there’s a serious accident, many of the companies spending all the advertising dollars have largely sold minimum limits policies. That means the companies not advertising pick up the actual cost of the accident. This translates into larger losses for the good companies. While the good companies are already at a cost disadvantage due to scale, now they also suffer a competitive disadvantage on loss costs.
The Competitive Disadvantage of the Good Companies is Increasing
The price driven companies are gaining market share. They have the benefit of large advertising budgets as well as scale which allows them to hold costs down. Now there’s another example of these companies are holding claims costs down. Some of the large companies now demand kick backs from body shops. They already had good pricing, now with kickbacks of as much as 5%. They’re effectively shifting part of their lost costs off their books. This is significant because loss costs are the largest cost in most insurance market segments.
Fixing the Problem
The problem is fixable. Fortunately, there are multiple parties that can fix it. These parties include: state lawmakers, state regulators and consumers. The actions needed include:
- States should increase the minimum liability limits
- All regulators should push to increase the transparency of the industry so consumers know which companies to avoid.
Lawmakers and regulators need to pass laws increasing the minimum liability limits. This would have the effect of forcing pricing driven companies to provide meaningful insurance coverage and not shift loss costs to other parties.
Consumers need to demand the transparency highlighted in point two. Lawmakers and regulators also need to push for more transparency. Importantly, lawmakers and regulators will need to resist the backlash that will come from the industry. No company that isn’t operating with the best interests of the consumer as their number one priority wants transparency.
How Good Is Your Insurance?
In reality, hardly anyone knows how good their insurance company is. Until now, there was no way to know until it’s too late. Once something happens and an insurance company won’t pay the claim, that’s when consumers find out how good, or bad, their insurance company is.
That’s all changed. ValChoice lets people know exactly how good their insurance company is. The data we use is high quality, coming from state insurance commissioners. We make the analysis easy to understand by putting every company on a scale from 0 to 100.
Here’s how to find out about an insurance company you currently buy from, or one you’re considering. Click the button below for the type of insurance you want to check out.
Note: ValChoice does not receive any form of compensation from insurance companies for presenting them as a good option in our car and home insurance reports.