Seven Ways Insurance Companies Cheat Customers
Insurance is meant to provide security and peace of mind, promising financial protection in times of need. It is disheartening to discover that some insurance companies resort to unscrupulous practices, taking advantage of their customers for their own gain. The following are ways that the insurance industry is leaving its customers feeling cheated and abandoned:
Underpayment of Claims
Insurance companies will frequently underpay the amount they owe when it comes to settling a claim. This can be done both intentionally and unintentionally, but either way, it leaves policyholders with less money than is owed to them.
One possible way insurers limit how much they pay on claims is by simply paying less on a batch of claims and seeing how many customers complain. If the number of complaints doesn’t reach a certain threshold — say, 5% of claim decisions result in a formal complaint — then the amount paid is lowered even further with another batch of claims. [1]
Delays in Claims Processes
Insurance companies may intentionally delay the claims process in an attempt to prolong payment on a claim and reduce their liability for it. This can be extremely frustrating for policyholders who depend on the money to pay medical bills or deal with other expenses related to their claims.
Denial of Claims
In some cases, insurance companies may deny claims outright, even if the policyholder is entitled to compensation. This can occur if the insurer believes that the claim is invalid or that it does not meet its criteria for coverage.
Misrepresentation of Policies
Misrepresenting the terms of a policy to make it appear as though they are offering more coverage than they are is another tactic insurance companies will use. This is often done to get policyholders to sign up for more expensive plans than they need.
Misleading Advertising
Deceptive advertising tactics ranging from exaggerated policy benefits to making false claims about the policy’s coverage are used by some insurance companies to lure potential customers into buying their products.
Exclusions in Policies
Insurance companies may also include exclusions in their policies that are not clearly explained to the policyholder which can greatly reduce or even eliminate a policyholder’s coverage for certain types of losses, leaving them vulnerable when they need to make a claim.
Misclassification of Risk
In an attempt to make a sale, the insurance company may misclassify the risk of a policyholder to give them lowered premiums which may lead to the policyholder not getting the coverage they need when they file their claim. This leaves them with financial losses that could have been avoided.
Protect Yourself
Understand how insurance companies put their customers at a disadvantage so you and your finances are not subject to their tactics. To protect yourself from being taken advantage of by insurance companies, consider the following steps:
- Understand Your Policy: Read thoroughly and ask questions to gain a clear understanding of your insurance policy. Ensure your understanding of the coverage limits, deductibles, exclusions, and claims procedures.
- Research and Compare: Before purchasing insurance, research different companies and compare their offerings. Look into their reputation, customer reviews, and any past issues with claim payments to avoid being taken advantage of. Consumers can use the NAIC’s Consumer Insurance Search Page to locate a reputable company and see complaint reports from the past 3 years. [2]
- Review Your Policy Annually: Regularly review your policy to ensure it still meets your needs as your circumstances change. Adjust coverage limits and add-ons as necessary, and verify that you have adequate coverage for any new assets or life changes.
- Document Everything: Keep thorough records of all interactions with your insurance company, including phone calls, emails, and correspondence. Document details of conversations, names of representatives, and any promises made.
- File Complaints if Necessary: If all else fails and you believe you have been taken advantage of, file a complaint with your state department of insurance. Delays, denials, and unsatisfactory settlements are among some of the most common reasons for consumers to file complaints. [2]
Know Your Rights
Don’t hesitate to ask questions if there is anything that you don’t understand about your insurance policy or coverage. Being aware of your rights and knowing your policy details can help prevent you from being taken advantage of by the insurance company.
Seek the assistance of a skilled attorney if you don’t fully understand the details of your policy or if you think your insurance company may be trying to take advantage of you.
Contact Goldberg & Loren today to schedule a free consultation regarding any of your personal injury needs.
Sources:
[1] Sadowski, J. (2023, October 25). Insurance companies have discovered devious new ways to rip you off. Business Insider. https://www.businessinsider.com/insurance-companies-get-you-to-pay-more-deny-claims-2023-10
[2] How to File a Complaint and Research Complaints Against Insurance Carriers. (n.d.). NAIC. https://content.naic.org/article/how-file-complaint-and-research-complaints-against-insurance-carriers
