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How an insurance company thinks

Few businesses are as misunderstood as insurance companies. They advertise that they will be our protectors, that they will "ensure" that you are treated right in the wake of a calamity.

You know the slogans they use: the friendly hands, the good neighbor, we keep our promises, we want you to know.

In our lifetimes, we may suffer one or two serious auto accident injuries. But we will see a million car insurance commercials, and they brainwash us into thinking insurance companies are on our side.

The truth about insurance companies

The truth is colder than those warm words. Insurers are not family. While you may be a policyholder, you are not the constituency insurance companies really care about. That would be shareholders. And the only way to deliver maximum earnings to their shareholders is to deliver minimum coverage to you.

This is true whether you are dealing with the other driver's insurance carrier, or your own.

Insurance companies are really investment companies. They take the money you pay in premiums, invest that money in stocks, bonds, real property and business investments.

Two things have to happen for them to succeed. Their investments have to pay off, and their outflow - their payment to injured parties - must be kept to a manageable minimum.

Three D-words define their strategy with you:

Deny, Delay, Diminish

Deny is easy to understand. If they refuse your claim, they are ahead of the game. This is where it would be nice to understand what your policy actually promises. The language of insurance policies allows many loopholes for insurance companies to simply say No, keep their money, and keep in invested.

Denial often turns into bad faith. If you feel your insurer has outright cheated you, you may have a strong case to get the money coming to you, but to punish them for their dishonesty by demanding additional money.

Delay. You may think, well, it took them 18 months to pay me, but eventually I did get the money. Again, think about the insurance company's investment needs. If they pay you right away, that money cannot be invested to generate more money. Many companies figure they can increase their cash on hand by as much as 7, 8, or 9 percent just by holding onto it as long as they can.

You may be unemployed and rehabilitating during this entire period you are without funds. That's your problem, not theirs.

Diminish. If your claim is for $100,000, they write you a check for $25,000. It's nice to have the smaller check, but it doesn't begin to cover your actual costs. Again, policies are written by insurance companies to maintain their own profitable advantage.

In conclusion

All of this is to say that insurance companies are not your best friend, no matter what their ads tell you. If you have been seriously injured, or if a family member has been disabled or killed in a car accident, the insurance company will have no qualms about minimizing their payout to you.

The more serious (the more expensive) your losses, the more important it is to work with an experienced lawyer who understands these games, and knows how to fight for your interests.

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