What do cavemen, geckos, snoopy or a ditzy young girl have to do with insurance?Nothing!
Insurance companies distract consumers with a barrage of entertaining yet often irrelevant information. No wonder few consumers know the truth about insurance. In this article, I hope to shed some light on insurance and how to distinguish good insurers from bad.
Insurance is a transfer of risk in exchange for money (an insurance premium). Some might be surprised to learn that insurance companies are completely unregulated by the federal government. Instead, each state has its own laws and a state agency to regulate insurers. This has resulted in a mish-mash of conflicting laws across the country and has added to the confusion among consumers concerning insurance laws. Conflicting laws and insurance regulations are hard on insurers too as insurers must comply with the requirements of each state it wishes to conduct business in.
To help determine whether an insurer is a bad or good egg, contact your state’s insurance commissioner. Since I practice mostly in Washington, Multnomah and Clackamas counties (my office is near Beaverton), I refer my clients to the Oregon Insurance Commissioner’s office to check up, praise or complain about insurers. Even outside Oregon, most state insurance commissioners keep tally of insurer complaints. Stay away from insurers who are leaders in complaints received. To file a complaint against your insurance company concerning its operations in Oregon go this link: http://www.cbs.state.or.us/ins/forms/consumer/comp.pdf
Next, consider contacting one or more of the insurance rating agencies such as Moody’s or AM Best. These companies rate insurers using ABC system– similar to grade schools. One significant factor considered is the insurer’s ability to pay its losses. Insurers who are more able to pay losses generally receive higher ratings. A high rating such as A++ means that, according to the rating agency, that insurer has sufficient financial reserves to pay anticipated claims. Other factors go into an insurer’s rating, check each rating agency for the specific factors it considers.
Now-a-days, more and more insurers sell via the web to keep costs down. But, use of a knowledgeable and connected insurance agent may be very helpful. While efficient for consumers and insurers, web marketing also cuts out the insurance agent.
You may say…. “Great!”. But there is a catch. A good agent will be your advocate in the event of claim dispute. Find an insurance agent who knows and understands insurance, not just sales. An agent who once worked in claims may be personal friends with the adjuster handling your claim. Without a good agent, you will need an attorney should your insurer fail to live up to its end of the bargain.
So what is the bargain? The “deal” with your insurance company- whether it is a life insurance, disability insurance, fire insurance, homeowners insurance or car insurance is the insurance policy and the state laws affecting the policy. Insurance policies use words that look like English, but often insurance policies use terms of art with very specific legal meaning you may not realize.
Sometimes insurance policies contain conditions or limitations to coverage. Most insurance policies require policyholders to cooperate with its investigation. Some policies contain “suit limitation” clauses which restrict a policyholder’s ability to sue its insurer. Other policies require policyholders to arbitrate certain disputes with them.
In addition to the written terms of your policy, insurance is based on the unwritten implied duty of “good faith”. Insurance is based on trust. You give the insurer some money (premium) trusting that if a loss occurs, the insurer will act in good faith in addressing the claim. What if an insurer acts in bad faith? Well, that depends on where you live. Some states have great penalties for bad faith insurers; others do not. While Oregon recognizes a claim for bad faith, available damages for insurance bad faith in Oregon is limited in most circumstances.