Insurance Companies and Claim Payment

[ToddC]

I view several insurance and financial forums and review the insurance questions. A comment that almost always comes up is the following:

"The insurance company will try to pay as little as possible on the claim".

People seem to be shocked and hold this against the carrier. I understand their frustration but I don't know that they are really considering the "big picture".

We are speaking of an insurance company. It's a business. Just like any other business, it exists to make money. Is there any business that does not spend as little as possible in order to return a larger profit? Almost all insurance companies are not privitly held, that is, they have investors that they need to answer too.

I understand that most people don't think of an insurance company as a business but it is just that. But insurance companies also play a major role in keeping commerce working. Without insurance policies, commerce would quickly screech to a sudden stop.

It's also ironic that people can have such a different piont of view about the way a claim is handled. When I'm addressing a claim and my insured thinks the other person is at fault, they don't want their carrier to pay a dime and even spend thousands of dollars to defend that $200 property damage loss. But when the same person needs to collect from an insurance company, they justw want to blindly pay the loss without even looking into the matter.

Don't get me wrong... I certainly understand why people don't like that insurance companies don't want to pay out money but I think they also need to understand why.

 

[J.R.]

I view several insurance and financial forums and review the insurance questions. A comment that almost always comes up is the following:

"The insurance company will try to pay as little as possible on the claim".

People seem to be shocked and hold this against the carrier. I understand their frustration but I don't know that they are really considering the "big picture".

We are speaking of an insurance company. It's a business. Just like any other business, it exists to make money. Is there any business that does not spend as little as possible in order to return a larger profit? Almost all insurance companies are not privitly held, that is, they have investors that they need to answer too.

I understand that most people don't think of an insurance company as a business but it is just that. But insurance companies also play a major role in keeping commerce working. Without insurance policies, commerce would quickly screech to a sudden stop.

It's also ironic that people can have such a different piont of view about the way a claim is handled. When I'm addressing a claim and my insured thinks the other person is at fault, they don't want their carrier to pay a dime and even spend thousands of dollars to defend that $200 property damage loss. But when the same person needs to collect from an insurance company, they justw want to blindly pay the loss without even looking into the matter.

Don't get me wrong... I certainly understand why people don't like that insurance companies don't want to pay out money but I think they also need to understand why.

If an individual gets into an accident and has to go to the emergency room who will foot the bill, the health insurance carrier or auto insurance carrier?

 

[arnguy]

In PA, there is a minimum requirement for medical coverage on automobile insurance policies. Therefore, IMHO the auto insurance company pays first---at least up to the limit---and the health insurance carrier would cover any excess. This coverage is in addition to bodily injury and personal liability. (P.S. I am not an expert or even very knowledgeable on P&C).

 

[arnguy]

Of course, the heath carrier would pay up to their limit.

 

[Crabcake Johnny]

Also realize that most health insurance companies can take money that you win in a lawsuit to offset what they paid in medical claims. So you get into a car accident and win $100,000 but your medical bills were $80,000. You might only be left with $20,000. It's called subrogation.

 

[J.R.]

So if I understand this correctly, if an individual or family is involved in a car accident and requires medical assistance, the auto insurance carrier will pay according to the limits of the policy and then the health insurance carrier will take care of the rest accordingly to the health insurance policy?

-J.R.

 

[insuremojo]

Also realize that most health insurance companies can take money that you win in a lawsuit to offset what they paid in medical claims. So you get into a car accident and win $100,000 but your medical bills were $80,000. You might only be left with $20,000. It's called subrogation.

This is not true. Subrogation is different. Subrogation is the term used for the legal process by which an insurer seeks recovery of the amount paid to the insured from a THIRD PARTY responsible for having caused the loss. Subrogation transfers an insured's legal right of recovery to the insurer that has paid a claim.
It prevents the insured from collecting twice for the same loss and ultimately holds the responsible third party accountable for the loss.

LOL smart guy.

 

[Crabcake Johnny]

I think that's what I said but maybe my example was wrong. Take this example; a drunk trucker hits you which results in $200,000 in medical bills for the insurance company. Later you win a million dollar judgement from the trucking company. What happens? From the way I understand it the insurance company can take $200,000 of that judgement.

 

[insuremojo]

I think that's what I said but maybe my example was wrong. Take this example; a drunk trucker hits you which results in $200,000 in medical bills for the insurance company. Later you win a million dollar judgement from the trucking company. What happens? From the way I understand it the insurance company can take $200,000 of that judgement.

You have to look at who the liable party is. In your example the liable third party is the trucker. The claimants insurer can subrogate from either liable trucker or his insurer. The insurer would have to prove that you were the liable party to be able to subrogate from you. Not so in your example.

Besides the truckers liability (whether personal or business) should have paid up to it's limits then if still not enough then you could sue for the difference if you didn't have under/uninsured coverage on your auto. If you did then your policy would kick in until your limits were reached. In that case your insurer could subrogate it's loss by going after the responsible 3rd party.

The claimant in your example is trying to double dip. You can't do that either.

 

[ToddC]

insuremojo, your just arguing semantics. John's posts are actually correct... just simplified to avoid turning into a book.

http://www.lcgroup.com/explanations/subrog.htm
"An insurance carrier may reserve the "right of subrogation" in the event of a loss. This means that the company may choose to take action to recover the amount of a claim paid to a covered insured if the loss was caused by a third party. After expenses, the amount recovered must be divided proportionately with the insured to cover any deductible for which the insured was responsible. "


Trucker files a health claim as he was injured in an accident. His health carrier pays. They then assume their insureds right of recovery if the at-fault party's liability carriers issues payment. That is, they are subrogated to their insured's right of recovery. Who, when, why, where they collect is really not the point of John's post and this would/could change depending on so many factors that it's not worth discussing. Bottom line, they _can_ recover their payment from any settlement.

The insurance company that pays a claim up front is _always_ going to recover from a 3rd party (otherwise they would just be demanding their own payments back). If they recover the money before it's paid to their own insured or after, it's still _third party money_. The _process_ is, as John stated, subrogation.

As far as the last post, it's difficult to understand what you are saying as you use the terms "claimant" who could mean anyone and "insurer" but are speaking about two different insurance companies. But yes, one's own insurance company _can_ collect funds already paid to their own insured. It's called..... well, you know.

About the only time I'd not consider recovery of funds paid, subrogation, is when a carrier makes a payment they did not owe to begin with. An example; A carrier requests to be paid by another carrier as they claimed they were subrogated to a right of recovery. The carrier pays but then later finds out they were not required to pay those funds. Requesting the money back would not be subrogation as they've not assumed any one's right of recovery. They are simply trying to get back a payment they should have never made.