How Do Insurance Companies Make Money?

My question to every single one of you out there is, "What service do you pay for all your life but get penalized for using?"  If your guess was INSURANCE ding, ding, ding, you win.

I'm sick and tired of people coming into my office shocked and dismayed that their insurance company would "drop" them or significantly raise their premiums if they were to ever have a claim on their insurance.  Wikipedia explains the way in which insurance companies make money as:

Profit = earned premium + investment income - incurred loss - underwriting expenses.

Insurers make money in two ways: (1) through underwriting, the process by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks and (2) by investing the premiums they collect from insured parties.

I have heard this comment,

"I've never had a problem with my insurance company and I have had them for 25 years!"

Well how many times have you had a claim against them or have you just paid your premium every six months for the past 25 years and watched them collect on that premium?

Insurance is a much needed service but don't go armed with a knife to a gunfight when dealing with them. Hire an attorney. You wouldn't call a plumber to fix your car. Why trust an insurance adjuster that is paid to make money for their employer?

"Insurance ain't nothing but a tax you have to live with. Cause you can't get anything without it and it won't pay you back." --Client

Insurance Claim Game: 10 Tips to Follow

I hate to reveal the secrets of personal injury litigation that help me reduce my student loan debt and feed the families of my staff.  However, I was given a second chance at life for a reason and that reason could be to educate you on not getting screwed by your insurance company or an at fault party's insurance company.

As with any legal endeavor the most important factors are the facts and circumstances surrounding the issue, or problem. Each case is different and there is no universal answer for every case. These are the most basic rules I could think of without leading you astray.

  1. Liability/Contributor to Negligence- Who? What? Where? When? and How Many?  are questions you need to identify in regards to how you incurred the damages, either personal or property, with your claim.
  2. James K. Ferrell of the Memphis Injury Law Blog gives a great 10 Step Guideline to follow after an automobile accident. No need for me to recreate the wheel. I would just replace #10 with "Call Me".
  3. Ken Dolan of Dolans.com has an article entitled "How to Win the Claim Game" for property claim tips.
  4. Pictures are worth a 1,000 words- take them of the area in question, pot hole, car wreck, broken porch, malfunctioning product, dog biting you, etc.
  5. Devil is in the Details- Do not, I repeat, DO NOT trust what insurance claims adjusters tell you. Insurance adjusters work for the insurance company. DING, DING, DING. That means they are not looking out for your interest but their employer’s interest.
  6. Yesterday, I had a client come in that had been in a rear end collision and he went to visit with the Farm Bureau adjuster for that at fault driver. The Farm Bureau adjuster offered the gentleman a check for $215.00 for ALL CLAIMS arising out of the accident.  My client was savvy enough to realize that his car alone may have more damage than $215.00 much less the Emergency Room visit, several follow up appointments with his family care doctor, and the MRI that he was sent for in regards to his neck pain.
  7. Another time, I had a client hit while exiting a school bus. The Nationwide Adjuster was looking for his parents that night and offered them $700.00 to settle his claim. My client had just gotten back from the ER and referred to an orthopedist for his leg.  I ended up getting them more than $10,000.00.
  8. Why do insurance adjusters do this? If they can get you to take a check for $215.00 now before you realize the true extent of your injuries they just saved their company tens of thousands of dollars. 
  9. Once you sign the adjuster's form you have just signed your rights away against the at fault party. Read my Can You Read? article
  10. Consult Someone that Does this for a Living- don’t ask your friend, mama, daddy, boss man, insurance adjuster for the insurance company, or Joe the Plumber. Ask someone that handles these type of cases. Reference my Do I need a Doctor, Lawyer, or Preacher articles.
           a.    When I needed to remodel my foreclosure home, I called a contractor.
           b.    When my Tahoe breaks down, I call a mechanic.
           c.    When I hurt my arm in a wreck, I consulted a doctor.
           d.    When my tooth hurts, I go to the dentist.