What You Should Know About Insurance in the U.S.
In their commercials, insurance companies are portrayed as reliable, friendly and funny. But they are hardly the characters we have come to know them by.
From Dennis Haysbert for Allstate to Brad Paisley and Peyton Manning for Nationwide, to LiMu Emu and Doug for Liberty Mutual, the talking gecko for Geico, Flo for Progressive and Jake from State Farm, insurance companies playfully try to gain consumers’ trust and attention. But the amount of money being spent on paid actors and other advertising ploys should come as a red flag, not as a source of relatability or comfort.
When it comes to actually paying out on the claims they guarantee coverage for, insurance companies are data-driven hardliners ready to holdfast during settlement talks. That’s because they have two major advantages working in their favor: Time and money.
When It All Changed
In 1994, McKinsey changed the insurance industry in the U.S., forever. In a presentation made to the board of Allstate, McKinsey said that Allstate had an obligation to its shareholders to maximize returns. From that point on, the insurance industry shifted from the benefit of policy holders to the benefit of shareholders. And as a result, Allstate’s earnings went from $240 million in 1994 to $2.4 billion ten years later. The premium dollars being paid by consumers is going directly towards growth, profit and advertising for insurance companies, all of which is to the benefit of their shareholders.
Today, insurance technology is calling the shots. “Colossus,” for example, determines claim payments based on statistics, technical data, and mathematical probabilities. It is designed to know a patient/plaintiff’s financial pain points and pay out less in settlements. Not surprisingly, the insurance industry is a leader in data science, and they know a lot about their consumers.
Big Data and Big Insurance Companies – What They Know
Insurance companies know things, like:
- How much you make
- What your living expenses are
- How much in savings you have
Algorithmically, they are then able to determine where pain points exists and when to offer lesser settlement amounts. After an accident, the majority of Americans cannot wait for a settlement, nor can they afford prolonged litigation. This is because many Americans do not have enough in savings to cover their expenses if they are no longer able to work due to an injury. Insurance companies know that. They also know what cases are worth and how much to offer to entice plaintiffs to settle early for a lesser amount.
An Alternative to the Property and Casualty and Auto Insurance Business Models
As an alternative, the insurance industry should be run more like a utility, and the cosmic shift from the ‘90s needs to be reversed – and go from the benefit of shareholders back to the benefit of policyholders.
In 2020, as a result of fewer people being on the roads during the coronavirus outbreak due to social distancing guidelines and high unemployment rates, many auto insurers began giving back premiums (here is a list of which insurance companies paid back what by NerdWallet). There was so much excess profit and no claims that insurance companies essentially had to turn some of the money back over to their policyholders. But don’t be fooled, it was not out of the goodness of their hearts.
Therefore, it is so important for consumers to have access to Consumer Legal Funding, sometime called Pre-Settlement Funding.
Consumer Legal Funding allows everyday Americans to level the playing field by having the staying power they need to get the proper settlement that they deserve rather than the settlement that the insurance company thinks you deserve.