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Yes, your insurance company IS trying to screw you!

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Have you ever sworn that your insurance company is simply out to screw you? I mean, you seem to pay through the nose for ever decreasing levels of coverage, and then when you need to file a claim they seem to be incapable of paying you fairly for your loss. Well, it seems this is by design, according to this lengthy article from Bloomberg. It is long, but certainly worth reading.

The article details how insurance companies have rigged the claims process to avoid paying claims at all costs. According to the article, it all began in the early 1990s when Allstate engaged management consulting firm McKinsey to help streamline their claims process. McKinsey came up with several strategies for Allstate that were quite unfriendly to consumers. One was called “Good Hands or Boxing Gloves”, an obvious play on Allstate’s longtime slogan, which called for Allstate to initially respond to a policyholder’s claim with a lowball offer. If the policyholder accepted the offer, they should be treated with good hands. If they didn’t accept the lowball offer or hired a lawyer, Allstate should put the boxing gloves on and fight back.

Another strategy from McKinsey was “sit and wait”, which directed the company to discourage customers by delaying settlement payments and stalling court proceedings. The idea is that the longer to insurance company can avoid paying out, the longer they can hold the money and make money on their investments. As an added bonus to the insurance company, customers often are worn down into dropping their challenge as either their patience or finances without a settlement are depleted.

Although Allstate may have started the trend, most major insurance companies now employ some or all of these tactics. Most are now also utilizing specialized computer programs some say are rigged to automatically lowball settlement offers.

Unfortunately, there probably isn’t a whole lot you can do about this. It seems almost everyone does it, so being able to avoid these practices is probably near impossible. Your best bets are to know what your policy does and doesn’t cover and keep very good records detailing your possessions in case of loss. You may also want to consider enrolling in the prepaid legal benefit at your work, if it is offered, so you are prepared to fight the insurance company when you do finally make a claim.

Crap like this is why I’m not scared by the sales tactics of traditional insurance agents who claim you won’t get good service from non-traditional companies like Progressive and Geico. Even the traditional insurance companies are going to try to screw you, so you might as well go with the financially stable company with the best rates for the coverage.

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September 26, 2007 - Posted by | Insurance

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