Diving Into Deflection - Part 2

by Mark Goldwich

Last time we ended by talking about the fact that despite all the frustrating tactics used by insurance companies, including unnecessary delays, confusing denials, and mysterious deflections, most claims – even those with both high values and merit – never seem to make it into court.

It’s not really that surprising that most of these situations don’t land in a courtroom. By the time most people start thinking about lawsuits, they’ve already been battling the insurance company for a year or more. Then they are told the lawsuit will probably take another two to three years! Be honest. What would you do? Sometimes, when people find themselves caught in the “deflection game,” they’ll give just about anything to be done with the process.

Are these “deflection” situations isolated cases? If you ask representatives of the insurance industry, the answer will be an immediate “Yes.” If you ask Elliot Spitzer, former New York Attorney General, and former Governor of the State of New York, he’d offer a somewhat different assessment of the situation.

What did Spitzer have to say about this? In a lawsuit, Mr. Spitzer accused major insurance companies of "fraud, bid-rigging, and antitrust violations," and charged some of the biggest players in the game with fleecing their customers. Spitzer warned that the American insurance industry “needs to take a long, hard look at itself," and suggested that "if the practices identified in our suit are as widespread as they appear to be, then the industry's fundamental business model needs major corrective action and reform."

He went on to note that "there is simply no responsible argument for a system that rigs bids, stifles competition and cheats customers." Mr. Spitzer’s investigation and lawsuit

focused first on corporate customers, but specifically included individual consumers as being among those victimized by industry practices. His press release was entitled,

"Investigation Reveals Widespread Corruption In Insurance Industry."

Image by dcemp.com

Isn’t the legal system supposed to correct problems like this? In theory, yes. And there are some encouraging signs. A 2007 DecisionQuest poll of practicing attorneys found 75% of respondents would now expect jurors to agree with the sentiment that insurance companies “would do anything to avoid paying even legitimate claims.” That’s refreshing evidence of reality-based thinking within the halls of justice.

But most of these cases, as we have seen, never reach a jury. For your own protection and economic well-being, it may be wisest to stop thinking of insurance companies in terms of your friendly neighborhood insurance agent, and start thinking of insurance companies as resembling the people who ran their firms into the ground by setting up a nearly incomprehensible maze of wholly-owned, partially-owned, and “affiliated” companies … companies whose relationship with one another seemed to require an advanced degree. I realize that sounds like a harsh assessment. But the irresponsible use of deflection warrants it, in my opinion. Let me give you a brief example that may help you understand why I feel as I do about this.

Think of a big insurance company. Let’s call it Baseball, Mom, and Apple Pie Insurance – BMAPI for short. BMAPI’s motto is, “Faithful and friendly, during good times and bad.” It has an expensive ad campaign that features gorgeous sunsets, adorable puppy dogs, and happy policyholders who dearly love and respect their local BMAPI agent.

Now, if BMAPI handles, say, 1.5 million claims in a year, and then deflects – sorry, “saves” – just $300 on each claim, that adds up to nearly five hundred million dollars more for BMAPI to keep for itself and invest as it sees fit (1.5 million times $300 = $450,000). That’s right, nearly half a billion dollars.

Follow me on this next part, because it’s extremely important. The number I just used to get to roughly half a billion dollars of extra income for BMAPI was, you will recall, three hundred dollars of, shall we say, “savings.” Now, you might well ask: How realistic is that figure I just used? Is three hundred dollars a valid number -- or a dubious number?

Hear me, please, when I tell you that my typical additional recoveries – that is, the money I get the insurance company to agree to pay in valid claims over and above what it had already agreed to pay out – is not in the hundreds of dollars. It’s in the thousands of dollars. That’s in my average case. 

Image courtesy of the lostogle.com

 .

Ponder that, if you will. Not three hundred dollars per case. Thousands of dollars per case. And that’s not the exception to the rule. That’s what usually happens.  Deflection is real! Taking this fact into consideration, let's do that math in our heads … 1.5 million times $3,000 = $4.5 BILLION! That’s per year, for just one company. Not too shabby! Are you starting to see why a cynical person might start to think all the coincidences that seem to favor insurance companies might not be so coincidental after all?

But now I really must be exaggerating about the $3,000 figure, right? I would say that is conservative, and base that on thousands of claims we have helped our clients settle for $5,000, $20,000, $100,000 and more (we even helped a client recover over $396,000 on a claim the insurance company insisted for 4 months was not covered at all). And keep in mind, we are just 1 firm, in 1 city, in 1 state, in a great big country.

For more information on bad faith insurance issues, please take the time to visit this web site: www.badfaithinsurance.org -- or just do a Google search with the words “bad faith” along with the name of your own “friendly and faithful” insurance company, and see what kind of ugliness pops up. You may be surprised.

In the next blog, we’ll get some more clarity on exactly how the “deflection game” is likely to be played in your world.

Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.