How Insurance Companies Raise Rates and Decrease Settlements

Fighting Against Biased Insurance Tactics That Reduce Accident Settlements

Although it seems like a straightforward question, as a law firm that represents injury victims throughout Texas, it has been our experience that it is rarely as straightforward as it seems. The weak link in that supposedly simple equation is the insurance companies. All of them hate the idea of paying out on policyholder claims, let alone paying large sums.

How Insurance Companies Try to Reduce Your Settlement

Insurance companies make sure that the variations in coverage from one motorist to another can cause real problems when it comes time to settle up. The basic auto insurance scenarios break down as follows:

• The at-fault driver has liability insurance. Insurance covers everything that the other driver is legally liable for. The rub? Each state has different minimum liability amounts. Therefore, if the damage to your car (or to you) goes over the minimum amount of the insurance coverage, you may still be responsible for the difference.
• The at-fault driver doesn’t have liability insurance, or has inadequate insurance. Texas gives drivers the option to go without insurance provided that they pay an uninsured drivers fee. The rub? If the at fault driver doesn’t have the insurance needed to cover your damages and isn’t wealthy enough to pay you directly, you may be forced to pay your own damages.

Insurance culture is dedicated to paying out less money than they should. In fact, adjusters use every trick up their sleeves in order to decrease settlements, raise policy rates, and “adjust” claims in the company’s favor.

Factors Used to Determine Accident Value, Rates, and Settlements

There is something fundamentally wrong with the idea that your emotional distress and physical pain can simply be reduced to numbers in a ledger. But considering the insurance business as a whole, it’s not too surprising that adjusters will use every angle, every statistic, and every baseline average to decrease your settlement and raise your rates.

Despite clever advertising and heartwarming jingles to the contrary, the primary business of insurance companies is to make money. Insurance companies make money by collecting premiums, not by paying out claims. To them, determining settlements and rates by using statistics is simply another way to increase their profit margins, regardless of whether the process is just or realistic.

Factors they use to shortchange claims are as follows:

• Gender. Men pay an average of $15,000 more for auto insurance than women. Presumably, these discrepancies are based on statistics and risk—men are more likely to be involved in an auto accident—and, therefore, justify the rate differential.
• Age. Young people between the ages of 16 and 25 have some of the highest insurance rates overall due to their perceived risk of accidents. Seniors (over the age of 65) pay higher rates than middle-aged adults, based on statistics that say older drivers tend to have more accidents.
• Education. Insurance companies claim that those with more education and better jobs are more likely to purchase more insurance (which should lead to a discount), while poor and undereducated people are more likely to file claims (thereby raising rates). People with more education (which apparently means a better job and more money) sometimes bypass the insurance process altogether by simply having the damage repaired themselves. People with less education (which apparently means a bad job and less money) can’t afford the repair bill, so they expect the insurance company to financially cover the damages. Since the less educated are more likely to use the insurance, their rates remain higher.
• Damages. Many insurance companies use comparative software known as Colossus to determine settlement amounts based on damages. The program takes info from an accident (property damage, injuries, etc.) and compares it to average settlement amounts paid for similar accidents. For instance, if you are in a car accident and suffer a broken leg, the adjuster simply types in the scenario and sees what the average settlement is for legs broken in car accidents in your region. It then calculates a settlement based on that average. Unfortunately, not every accident has the same value to the victim—nor is the baseline data reliable, as it is collected by the biased insurance company itself.

Beating Them at Their Own Game

Although insurance companies have spent years perfecting their cruel game, this doesn’t mean that you can’t win. In fact, by taking extra precautions with your insurance policies and by teaming up with an experienced accident lawyer, you can ensure a winning hand. Policies and strategies to consider to give yourself an ace in the hole include:

• PIP. Personal Injury Protection (PIP) is a smart way for you to protect yourself in the event that you cause an accident. In Texas, Personal Injury Protection is automatically added to the policy of any teenage driver, unless the parents opt out of it. However, adults often find that having PIP is a smart addition to their insurance coverage. It doesn’t matter if you’re the safest driver in the world, any time you get into an accident you’re at risk of being found at fault. PIP will help protect your finances in the event that you are found liable for injuries to others.
• Uninsured and underinsured collision coverage. It’s also wise to protect yourself from a potential accident by buying an uninsured policy or collision coverage. If you get hit by someone with either no insurance or not enough insurance, having these options can keep you from having to wait for an interminable length of time for payment.
• GAP. Guaranteed Auto Protection (GAP) protects you during the period of time where a car loan or lease may be more than the current cash value of your car. This will ensure that if your car isn’t worth repairing, then you’ll have the finances to pay it off rather than continuing to pay for a car that you can’t drive.
• Stacking. Through some legal wrangling, stacking enables you to combine multiple policies that you already have to recover the full amount of financial damages. Rather than only being able to use your policy, you may be able to stack your spouse’s policy on top of yours in order to get a larger settlement for damages. For help with these complex issues, as well as any other insurance issues following a car accident, consider utilizing the expert assistance of an experienced traffic accident lawyer.