When you buy a car, you can check the tires, look under the hood, or take it for a test drive. However, when you buy an insurance policy, you are not buying just a piece of paper but are buying the insurance company’s ability and willingness to pay claims. As a result, the only real way to know what you are buying when shopping for insurance is to have real information about a company’s track records for paying claims and its financial stability.
While it is possible through publications like Best’s Review to find out about the financial stability of an insurance company, it is usually next to impossible to find out statistics on an insurance company’s payment of claims. Pertinent questions might include: How many claims were made of an insurance company within a year? How many were paid? What was the average amount paid per claim? How much was paid by the company compared to the amount claimed by the insured? How many claims were denied? How long did it take for the claim to be paid? What types of claims that the insurance company paid? How many complaints did the insurance company receive? How many insurance policies has the insurance company written in the year? How many have been canceled? How many policies have not been renewed after payment of a claim?
Unfortunately, insurance companies fight very hard to keep much of this information hidden from consumers. For instance, State Farm recently asked Florida’s courts to declare that its Quarterly Supplemental Reporting data, which included county by county breakdowns of the number of policies written, canceled and not renewed, was a trade secret. And unfortunately, the courts agreed with State Farm’s position.
The price of all of this secrecy is that consumers do not know what they’re buying until it is too late. In many cases a consumer doesn’t know that they have bought insurance from the wrong company until their claim has been denied for a bad reason. We have handled many cases where a policyholder has had a claim denied for an illegitimate reason.
Insurance companies like to have cute ads that entertain us and tell us how they are cheaper than everyone else. Consumers will benefit when insurers are willing to provide honest information about their track record with the insurance that they are selling. This will not happen until state regulators get a little bit less cozy with the insurance companies and start requiring that information like this be publicly provided.