Insurance Company Tricks: How they Make Money at Policyholders Expense

1201127_pink_piggy_bank.jpgPeople purchase insurance policies so that they can make sure they have the help they need when times get tough. When you are in a car accident, when a flood destroys your home or when you are diagnosed with an illness that requires long-term medical care, you want to believe that you can count on your insurance company to be there and deliver what they promised to you. Many times, this is not the case. Unfortunately, when insurance companies do not meet the terms of their policies and arbitrarily deny claims or delay compensation, the public suffers and the insurance industry gets richer.

The American Association for Justice issued a report highlighting the many ways the insurance industry profits off of consumers and policyholders. After reviewing thousands of claims and news reports, the AAJ identified the ways insurance companies put profits over people, despite the fact that the industry makes an estimated $30 billion in profits every year.

So, just what are these “tricks of the trade” that have helped insurance companies reduce payments to customers? The tactics include the following:

1. Denying Genuine Claims – Many companies, including State Farm, AIG and Allstate utilize a policy of actually denying claims to consumers. In fact, these companies often reward employees for denying genuine claims. Many people accept the denial, which only increases the profits of the multi-trillion dollar insurance industry. Still others choose to pursue their claim in court, which can result in insurance companies dragging these matters out for years or engaging in acts of fraud to avoid paying claims.

2. Delay the Claim until Death – Some carriers will delay claims until a person gives up, or dies. Many states have laws in place that terminate certain damages should the claimant die. By delaying the claim until an ill or elderly person dies, the insurance industry can wind up saving a lot of money. How do they do this? According to the AAJ’s report, many insurance employees are encouraged to mail the wrong forms to policy holders and then deny the claims based on incorrect paperwork.

3. Discriminating by Credit Score – Many companies use credit scores to determine the amount of the premium the policyholder must pay, if they can even receive insurance at all. This method penalizes the poor and those who have little credit or have fallen on hard times.

4. Canceling Coverage for the Sick – Some insurance providers cancel policies once someone falls ill and their condition requires costly medical treatment. The AAJ found that employees who met the “cancellation goals” were offered bonuses.

5. Canceling for Asking Questions – Yes, insurance companies have canceled policies for people just inquiring about making a claim. For this reason alone, many people refuse to file a small claim for fear their coverage will be dropped.

What Can You Do to Protect Yourself?

 For starters, read your insurance policy so that you fully understand what is covered and what isn’t.

 Make sure any information you fill out on a form is correct. A simple error could be enough for the insurance company to cancel your policy.

 Be familiar with how to handle a denial from your insurer.

 Never cash any check you receive after your policy has been dropped. The insurance company may take this to mean that you have accepted their offer.

 Keep records of any conversations, correspondence and bills. Always get everything in writing, including the name of the company representative and the information they told you.

 Contact the Florida Office of Insurance Regulation. They cannot help you with a private matter (only an attorney can), but they may be able to provide you with some helpful information.

 Do not give up. Insurance companies will employ crooked tactics to take advantage of people in order to pay you as little money as possible. The Citrus County Injury Attorneys at Whittel & Melton can offer you the legal help you need. By having a team of injury lawyers on your side that know the tricks of the trade, you can feel confident that you have the advantage you need to fight for your rights.


Remember, insurance companies are out to protect their financial interests, not yours. The Citrus County Injury Attorneys at Whittel & Melton represent those who have suffered from major or minor injuries and have been treated wrongly by their insurance company. We proudly serve clients in Inverness, Crystal River, Beverly Hills, Lecanto, Homosassa, Dunnellon, Hernando, Sugarmill Woods, Citrus Springs and Floral City.

If you have been injured in an accident, contact the Citrus County Injury Attorneys at Whittel & Melton online or call 352-726-0078.

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