In my article, "How Do Insurance Companies Make Money?", I go over Profit = earned premium + investment income – incurred loss – underwriting expenses. However, it is not my intention to be that technical this time around.
Insurance companies have many different layers, or divisions, but you as the client, or insured, interact with insurance companies on only 1-2 levels:
- Insurance Agent -sells varying forms of the insurance, or service.
- Insurance Adjuster – protects the insurance company from losing money on the service for which you paid for the insurance company to provide to you by way of a premium and insurance contract (policy). Adjusters minimize the "incurred loss" in the above equation.
As to the Insurance Agent:
It has been my experience that these professionals provide you with information on the varying types of insurance– property, casualty, life, health, and disability. They should review the different policies they have available and the coverages which those policies provide, along with the price. However, they are not usually legally oriented or familiar with the "back door" aspect of what they are selling. Meaning, they are doing exactly what they are suppose to be doing, "selling insurance". Your insurance agent will most likely refer you to the nearest consolidated insurance claims center if you were to need the service you paid for by way of an insurance claim.
For example: if you were injured in an automobile wreck, lost your shingles when a storm came through, and/or the property or person you bought insurance on was damaged/injured in anyway. Your insurance agent does not usually handle that, they refer you to a claim center with insurance adjusters. If your insurance agent is kind enough to assist you with the insurance claim procedure they still have no authority, or impact, in how the claim is resolved.
As to the Insurance Adjuster:
They are usually not in the same state as you. If they provide you any information about your legal rights please ask them if you can record the conversation or get everything they just "counseled" you on in writing. Insurance adjusters have not passed any state Bar requirements to be lawyers and/or offer legal advice. They work for the insurance company that makes money when it brings in more premiums that are paid by their clients than it pays out in insurance claims. Their interest are not aligned with your interest as they are evaluated on ensuring that insurance claim payouts are minimized.
Read-One of the factors that an insurance adjuster is evaluated on for their job and them keeping it is to offer you the least amount of money possible for your injuries and/or property so that their employer, the insurance company, maximizes its profit.
Common Misconceptions I hear all the time in my office:
- I thought they would do the right thing; (Why would you think that? Again, your insurance agent may be the kindest person in the world but that is not who you are dealing with.)
- I have never had a problem with my insurance company the 20 years that I have had them; (How many times have you had to file an insurance claim? Oh, now the light bulb goes off.)
- The insurance adjuster told me I didn’t need to get an attorney or another appraiser; (Now why would they not want you to get an opinion other than theirs? *hear Jeopardy music*)
- The insurance adjuster said I couldn’t go see the doctor; (Why are you listening to anyone other than a doctor in regards to medical advice?)
- I don’t want to sue anybody; (80-90% of the time no law suit is filed. If one is filed it may list the negligent party but that is because insurance can’t be mentioned in a trial. The insurance company is the one that actually defends any law suits you bring and pays money up to their coverage amount if a verdict is rendered.)
All I ask is that you be informed and educated on the interest of all the parties involved and not just assume anything.
“Knowledge is of no value unless you put it into practice.” — Anton Chekhov