Insurance companies play a major role in any personal injury claim because these companies provide such a broad range of coverage. Typically, people purchase insurance policies such as car insurance, health insurance, homeowners insurance, and life insurance. Additionally, businesses and professionals may buy liability insurance. One important fact every person who purchases an insurance policy or deals with an insurance company should know is that these companies operate in order to earn profits.
This means they want to increase revenue coming into the company while decreasing payouts to policyholders and other claimants. Insurance companies derive revenue primarily from premiums and secondarily from administration fees. Unfortunately, this drive to increase profits leads some insurers to practice unfair or deceptive tactics to limit payouts.
Unfair and Deceptive Insurance Strategies
One unfair insurance tactic is policy rescission. Basically, an insurance company will cancel a policy when a policyholder needs coverage for a substantial cost. The insurance company justifies this cancellation by finding some pre-existing condition that was not reported on the original application. This allows the company to avoid paying the substantial cost even if the policyholder has never missed a premium.
This practice is particularly devastating to policyholders because the cancellation of their policy comes at the exact moment they need coverage the most. Insurance executives are aware of this strategy and have admitted to a congressional subcommittee that it will not limit the use of policy rescission to cases of intentional fraud.
And their unfair insurance tactic is called “purging.” Using this tactic insurance companies determine which accounts are unprofitable and intentionally increase the rates of these accounts to unrealistic amounts. For example, Cigna imposed a rate increase on certain family plans that would have cost $44,000 per year, and the company only gave the policyholders three months to meet this rate increase.
Recently, the Chicago Tribune published an article reporting on allegations by a former Allstate executive that insurance companies manipulate their insurance software to underpay claims. Many insurance companies use the insurance software, Collossus, which is marketed by Computer Science Corp. (CSC). In a class action lawsuit (Hensley v. Computer Sciences Corp.), a CSC executive testified that Collossus could be “tuned” to achieve a particular level of savings, such as 15 percent for all claims.
Do You Need Representation in Order to Obtain an Insurance Recovery?
If you or a loved one needs to file a claim against an insurance company, a personal injury lawyer can protect your interests. d’Oliveira & Associates has the legal expertise to provide advice and obtain compensation to which you may be entitled. Our law firm has over 30 years of experience handling personal injury claims and negotiating with insurance companies.
Please contact the law offices of d’Oliveira & Associates at 1-800-992-6867 or fill out a contact form for a free legal consultation.
Sources:
- http://consumerist.com/2009/06/18/insurance-industry-still-wants-to-cancel-sick-peoples-coverage/
- http://voices.washingtonpost.com/ezra-klein/2009/06/the_truth_about_the_insurance.html
- http://articles.chicagotribune.com/2012-06-04/business/chi-report-raises-questions-on-how-insurers-set-injury-payments-20120604_1_large-insurers-allstate-insurance-commissioners
Paul d’Oliveira
Attorney Paul d’Oliveira has been practicing personal injury and disability law for over 30 years. He started his personal injury law practice in 1989 with two offices in Fall River, MA and East Providence, RI. Today his firm has 16 offices in RI and Southeastern, MA.
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