I understand what you're saying, and you've opened my eyes to what you have to contend with. But are you telling me it's not true that insurance companies try to avoid the obligations they've entered into with people by allowing things to play out in a courtroom? Are you saying there's nobody at the insurance company who is trained to deny claims and then see what happens? My experience is that you have to call them back and threaten to get a lawyer. Sometimes you have to get a lawyer to make them pay what they've contracted to pay (this is with health insurance). Tell me that this doesn't happen, and that this isn't part of what you do. But if you tell me that, could you also explain how you've avoided being involved in that? — frank
I'm not vouching for either claims adjusters, attorneys, judges, or juries. All do all sorts of wrong things.
Do they train the adjusters not to return calls and take risks with the hopes something will screw up the claimant, I doubt that. There is no loyalty among adjusters, management, legal departments, or really employees generally, so no corporation is going to formalize a training process that instructs how to engage in bad faith dealings. That is, even if management decided it would be best to be underhanded, if they teach you that, when you quit a week later, you get to expose the company to all they've been doing.
This has nothing to do with morality. It has to do with self-interest. You're suggesting that a multi-billion dollar insurance company with tens of thousands of employees might actually teach Billy Bob from Dothan, Alabama how to cheat from his cubicle. That's investing a whole lot of trust in Billy Bob. Billy Bob becomes, as they say in the insurance industry, a significant business hazard.
Are you asking if Billy Bob might not be an even tempered decision maker who might get into a petty arguments and make people's lives difficult? I'm sure that happens and my guess is that management would not want to see that happen and then Billy Bob becomes his manager's problem.
Insurance companies make their money by investing the premium dollars into the market. They act as a bank. As long as their return exceeds their cost to obtain their money, they profit. If for every $1 collected, they, for example, pay out $1.03 in expenses, but they get a 6% return in the market, they profit, even when operating at a loss. That is, they paid 3% for their money and they invested it at 6%.
Some of these carriers have 10 of millions of policies in force with billions in premiums, so their actual dollar profits are astronomical. As claims payouts increase, premiums rise to offset that, and as long as all competitors within the market are subject to the same forces, they're all dealing with the same profit margins. I'm telling you this so that you can understand that quibbles here and there over claims payments are not going to significantly affect profits. If the S&P drops, then that will really matter.
But, yes, if Company A has claims payments of a significantly higher percentage than Company B, Company B will see higher profits, but that's doubtfully the result of bad faith dealings by Company B in keeping claims payouts low, but it probably to do with a systemic problem in Company B's claims process where they either are inefficient, have bloated expenses, or they have a culture of over-paying claims due to risk aversion.
In other words if a company is losing profits, they probably first look to their investments and their expenses, as opposed to issuing a decree to reduce claims payouts.
Anyway, this idea that the way insurance companies profit is by hiring a bunch of cheap motherfuckers who screw people up envisions a very unsophisticated business world.