06/30/2017
You’ve been in a car accident. Now what?
Choose a lawyer that is competent, experienced, and respected by insurance companies! Insurance companies occupy a good or at least neutral space in the average person’s mind. Insurance companies spend hundreds of millions of dollars every year to a) make you think they’re “on your side,” and b) keep injured people from getting the benefits that their policyholders pay for.
Why do insurance companies work this way? It helps to understand what insurance is. Insurance is basically a risk between the insurance company and their customers, or policyholders. The policyholder and the insurance company are evaluating the risk on whether the policyholder will suffer a loss. A loss can be property damage to your house or your car, or it can be an injury to you or someone else. The policyholder pays a premium to the insurance company periodically for a policy that pays out if there’s a loss. The policy usually has limits. For example, if you have a good driving record and buy a policy of bodily injury automobile insurance for the state minimum limits or $25,000 per person/$50,000 per accident, your premium for a one year policy might be $500. If you don’t get in a car accident over the period of that year, the insurance company wins $500. If you do get in a car accident, then the insurance company might have to pay some or all of the policy limits, up to $50,000, while you only paid $500. In that instance, you win, and the insurance company loses…until they raise your premiums if you want to renew your policy.
Insurance companies earn money, generally, in two ways: from premiums from their policyholders, and from the investments that they use those premiums to purchase. When the stock market takes a hit, so do the books at ABC Insurance. So, like a lot of businesses, when the money coming in slows down, they find ways to cut costs. A major cost to insurance companies is paying claims that people make against their policyholders. So, to reduce how much money insurance companies have to pay, the companies do three things:
First, insurance companies do their homework. They find out about their policyholder – how old is she, what is her driving history, what is her credit like, does she have any medical conditions, what kind of property does she own, and how much is it worth? They find out about what kinds of losses people that fit in a similar profile suffer. Anyone who has ever been a teenage boy or been a parent to one knows that insuring them to drive a car is very expensive. That’s because teenage boys of just about any stripe are known to get in car accidents that insurance companies have to pay for. Similarly, there’s a good reason homeowners insurance policies don’t cover floods – flood insurance is a separate coverage that you have to pay an additional premium for because it’s much more likely to happen.
Second, insurance companies limit their risks in the policies that they sell. That’s not just limiting how much insurance you can buy, it also limits the events that trigger their liability. For example, negligent construction of your house is not covered by most homeowners insurance policies. Or, if you bought a comprehensive policy of auto insurance, that policy covers much more than basic, minimum liability insurance, but often does not cover damage to your car resulting from hitting a deer or hail damage. You’re on your own there!
Third, and most importantly for people injured in a car accident, insurance companies take a lot of steps to limit how much money they pay for bona fide claims. While insurance companies used to pay the average person with a lower back injury $25,000 for every $10,000 the injured person received in medical treatment, today that amount is closer to $5,000 – a 75% reduction. If the injured person didn’t hire a lawyer to represent them, that amount is even less. It’s not as though back injuries somehow got better, or insurers have been paying a larger number of claims, or as if the treatment for back injuries became much more effective in the last thirty years.
Insurance companies just started paying accident victims less because they could get away with it. They bought or developed computer programs designed to minimize how much money they pay injured people. They designed company policies and insurance policies with the goal of paying less money for fewer claims. They created an entire industry of lawyers to defend claims. They sometimes pay these lawyers more money in attorney fees than they pay the injured person making claims against them.
An insurance company is a business. Most insurance companies are corporations. Any business school grad will tell you that the goal of the corporation, above all else, is to increase the company’s stock price. It is not to pay what’s fair, or make sure the customer is happy, or do what’s right. On the other hand, lawyers have a duty to do what is in his client’s best interest, give good advice to his client based on the facts and the law.
Somehow the perception of personal injury lawyers and insurance companies is reversed. But if you’re ever in a car accident, someone with your interests in mind who knows how insurance claims work is a valuable partner indeed. Let us know if you’re the kind of person who could use our help and call us at 502-633-6002 or email me at [email protected].
