Saturday, January 15, 2011

Insurance Companies: A Personal Injury Lawyer's Opinion

With 15 years of experience in personal injury cases, I have some strong opinions about insurance companies. Most of my experience has been with car accidents, so I'll focus on that but some of the companies also cover homeowners or other types of insurance. And my opinions will center on how the companies are toward their customers, not towards plaintiffs or plaintiff attorneys.

First of all, I worked for Allstate in the late 1990s. At the time I generally had a good feeling about the company. They were tough on weak plaintiff cases but generally fair on severe injuries. As an in-house lawyer, I worked closely with the claim reps and claims managers - the Allstate staff who investigated claims and made the decisions about whether to pay and if so how much. They had a lot of experience and knowledge and were just good people. I didn't always agree with them but they had reasons for their decisions.

Their work environment was in transition. In the good old days, they'd go out into the field, like to the scene of the accident. But when I got there Allstate was changing things on them, chaining them to their computers and reducing their ability to get their hands on the meat of the cases. This helped them handle a higher volume (thus saving money) but it reduced quality. It also made the job less pleasant and accelerated retirement. That further reduced quality by removing the best staff. Some of the newer reps were good, but still didn't have the same level of experience.

Allstate was, and is, facing pressure from the newer low-cost insurers like Geico and Progressive. On the other end was the longstanding competition from State Farm, which had better numbers in customer retention.

Allstate and State Farm are so large that they're under constant pressure to keep their existing customers and bring in new ones to replace the ones they lose, while keeping costs down. I think those pressures make it very difficult to provide the best service and be fair to their customers.

At the bottom of my list is Geico. In my experience they are too aggressive on cutting costs. I've seen them refuse to pay medical bills for their customers that obviously should be paid (and I've heard complaints from doctors about Progressive doing the same). One property damage claim stands out in my mind. Our client had Geico and was hit by a State Farm driver. Her car was totaled. Geico told her that her car was worth $5000. I checked with State Farm first, and they offered our client $6500. So maybe Geico saves 15% on the price, but they screwed our client for 30% when it came time to pay a claim.

I've also seen Geico refuse to pay plaintiff claims in a way that puts the Geico customer in jeopardy. When you cause an accident and the person is really hurt, your insurance company's job is to protect you. The worst example is the case we had where our client suffered an amputation after being hit by a Geico-insured driver. We asked for the $25K policy and they refused to pay - on an amputation! In the end we went to trial and the Geico customer faced a judgment of millions of dollars filed against him - when Geico had a chance to settle the case for $25K.

I never saw an amputation when I was at Allstate. They were smart enough to pay a claim like that before anyone had to sue.

It can make sense for an insurance company to refuse to pay a claim, or even for them to hold off on settling because they're investigating something. But when all the facts are in, it's time to settle. Even though I like State Farm, they failed in this one on that same case where they were good on the property damage. Their customer was clearly at fault and our client had to undergo two shoulder surgeries. And there we were, a week before trial and they still hadn't offered a penny. This wasted everyone's time and money, and put their customer in jeopardy.

During my time I've seen that some insurers are just better all around. Good examples are Travelers, Hartford, Nationwide, and Amica (our insurance company). These companies seem to work with their customers very well, and in particular they don't do frivolous denials. I remember when we chose Amica. I was reading insurance industry numbers that showed Amica's "complaint ratio" was dramatically lower than State Farm and Allstate. I can't say they're perfect, but we've been happy with them.

One of the underlying lessons is simple: You get what you pay for. If someone's advertising that their product or service is cheap, then it probably is. I'm not a cheap lawyer and I'm happy about it. We lose some potential clients who are looking for the cheapest lawyer they can find. We do the job right and provide good service. That's what I want to do for my clients, and that's what I want my insurance company to do for me.

One other thing - don't be cheap yourself. Make sure you have enough coverage. It's rare but I've seen cases where wealthy people didn't have enough insurance. That can dramatically change your financial circumstances and even drive you into bankruptcy. Getting $100K in coverage doesn't cost that much. And an umbrella policy (usually covering up to $1 million) isn't much more. If you're not sure, go through an agent. They'll help you make the right choice.
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