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The Economics of Denials and Underpayments in the Insurance Business

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Have you experienced a denial or underpayment by your insurance company as a result of an insurance claim?  Or, alternatively, have you have heard from a friend or neighbor who had their valid claim denied for no good reason, or perhaps you even heard it on the news?  There is an economic explanation for this: insurance companies are profit-driven entities.  They insure risks to property and people in exchange for periodic payments in a specified amount called premiums.  Insurance companies then use the premiums to pay for daily operations and overhead, salaries, marketing, claim settlements, and other expenses.  They invest the rest and seek a return on their investments to pay bonuses to their executives.  The ultimate goal of insurance companies is to maximize their profit for the benefit of shareholders.  As a result, the more premiums the company earns and the fewer expenses they incur, then the higher their profit will be.  In order to minimize expenses, insurance companies employ several tactics aimed at underpaying and denying claims.

In the hail claim context, insurance companies will do almost anything to underpay or deny claims to damaged property in an effort to boost their profits.  It’s big money in high volume situations.  Many of these tactics are illegal under consumer or insurance laws.  As a policyholder, you do have rights – even though the insurance company does not want you to know that.  Recently, more and more insurance companies have been found guilty of bad faith practices.

Now, you know the true reason why your insurance company might be underpaying or flat out denying your claim.  If you suspect that you are being treated unfairly by your insurance company or just feel they are not upholding their end of the bargain, then having an experienced insurance attorney by your side can help you deal with the insurance company.

The attorneys at the Amaro Law Firm have vast experience dealing with insurance companies.  In fact, some of their attorneys worked as insurance company defense lawyers before joining the firm.  Now, they help property owners fight for fair and just treatment.  Our consultations are free.  If we cannot add value to your claim, we will not take your case.  When an insurance company is found to have acted in bad faith, they are required to pay reasonable attorney’s fees.  Therefore, we are only paid if we win. Contact us today for a FREE claim evaluation.