Accidents happen, but their very nature makes them impossible to truly plan for. However, insurance does offer some protection to provide peace of mind. Most of us choose the auto or health coverage we think we will require, and we pay a monthly or annual premium for that coverage. Good faith consumers pay for these policies assuming that if they are needed, we will receive what is due us. Sadly, however, it does not always work that way. When they are needed the most, insurance companies often offer compensation far less than the coverage you purchased. Insurance companies have an entire toolbag of excuses they use to justify not giving you what you pay for, but one particular strategy has come to the forefront: post-claim underwriting.
What is Underwriting?
To comprehend post-claim underwriting, you must understand how insurance providers think and operate. These companies function in a reality of risk – they insure risky situations, and they carry the significant risk of having to pay someone a large sum of money. Recognizing the risk of possible claim disbursements is an essential step in the insurance company’s decision to provide coverage or not. To address this inherent risk, insurance companies engage in underwriting.
The process of underwriting attempts to minimize guesswork in its determination to take on a new “risk.” This can be achieved in one of several ways, including an application questionnaire or providing medical history. Effective underwriting reduces the frequency of bad risk, simultaneously maximizing potential profit. However, underwriting and risk assessment are costly processes that can significantly reduce potential profit. To avoid the expense associated with underwriting, insurance companies have developed post-claim underwriting.
What is Post-Claim Underwriting?
An insurance company that utilizes post-claim underwriting doesn’t assess the relative risk of an applicant before agreeing to coverage. Instead, the insurance company issues a policy without investigation, allowing for rapid collection of premium payments. They will go on collecting profit until a claim is filed. At that point (post-claim), the insurance provider will begin a comprehensive investigation to find any reason to deny the claim and refuse to pay. Post-claim underwriting prevents clients – who have paid the company premiums for years – from accessing the benefits they rightly deserve.
The post-claim underwriting investigation usually relies on the information provided in the original application. Insurance applications can be detrimental to unsuspecting customers. Insurers typically require their clients to answer questions that are developed for the purpose of being confusing. The insurers expect mistakes to be made, often in the form of answers that are incomplete, improper, or inadequate. If post-claim underwriting discovers any discrepancies between reality and the responses given on the application, the claim is denied. This strategy allows the insurance company to only expend resources for investigation when a claim is filed – not with every application.
Can You Protect Yourself?
It is vital to understand that insurance companies are, first and foremost, businesses. The reason for a business to exist is to make money. But that doesn’t make post-claim underwriting ethical or even legal. You can protect yourself by involving the insurance company in your application process and asking any questions necessary. But sometimes, this may not be enough to ensure that you will be paid if you submit a claim. If you have experienced an accident and think you are being mistreated through a post-claim underwriting process, contact an attorney who can negotiate with the insurance company on your behalf.
Probinsky & Cole are personal injury and immigration attorneys with offices in Sarasota, Orlando and Tampa.
