Entries Tagged 'Car insurance' ↓

In the good old days before there were organized police forces, it was left to a few individuals to enforce the law. When they proved inadequate, there were feuds and vigilante action by the victims. Obviously, this fighting disturbed everyone, so states slowly got into the law enforcement business, recruiting and training people to keep the peace and identify criminals. Today, we rely on state and federal policing agencies, supported by CSI and other forensic agencies. But there’s been a fundamental and unchanging truth from the early days. More people avoid detection and profit from their crimes than are caught. That’s why the courts are forced to use deterrent sentencing. What judges are saying to potential criminals is there will be long periods of imprisonment if they are caught. The irony is that, if people were sure they would be caught, lighter punishments would be sufficient. It would cost us less to keep all these people in jail. Our society would be safer.

So why is it so difficult to detect fraud? Surely dishonesty should be obvious to an experienced insurance company? Well, sadly, detecting which claims are fraudulent is not easy. Let’s take a simple question. Both drivers involved admit there was an accident. One driver submits a medical report showing neck injuries. On what basis should the insurer challenge the medical report? Well, detailed investigation might show this particular clinic advertises for people to report accidents to them. Or this clinic may consistently be receiving business through referral networks. Either way, the clinic is found to specialize in the treatment of traffic accident injuries. This could make them highly skillful and deserving professional respect, or it could suggest the clinic exaggerates the injuries for its own profit when it bills for treatment, paying commission to referral agents and passing only some of the benefit on to “patients” who get settlements for their injuries. Is an insurer supposed to get a second opinion from an independent doctor on every patient from suspect clinics? Or suppose someone wants to get out of an auto loan so stages a small accident and pays a repair shop to set off the air bags and certify more serious damage so the vehicle will be totaled. If this is a one-off event and there’s no pattern to suggest this repair shop is dishonest, why should this particular claim set off alarm bells? Continue reading →

The need for government to balance the budget at every level is starting to bite. While Washington struggles to cut a few trillion off the federal budgets without raising taxes or cutting entitlements (it will be a good trick when someone works out how to do it), state and local governments face each new day without enough money to pay all their bills. This has been forcing lay-offs, cuts in pensions and other benefits, and a reduction in the quality of services provided local taxpayers. The pain is being felt all round the country. So what’s a local government to do when it’s supposed to keep providing services but it’s not sure whether there’s enough money to pay the bills. For example, fire departments have to keep their equipment in a constant state of readiness with enough people to send out to actually fight the fires. Local residents would not be pleased if their calls for emergency assistance were met with the reply the pumper had broken down. Men were being sent with buckets.

So to help pay all the bills, many local governments have hit on the idea of charging those involved in traffic accidents for all the assistance they receive. So, if you have the misfortune to find the metal of your vehicle round you like Christmas wrapping, you will be relieved when you hear the police, fire department and ambulance roaring to your rescue. Relieved, that is, until you realize you are being billed by the hour for all these rescue services. This is a rental for the benefit of all the transport bringing the cutting equipment and staff to operate it, plus the paramedics to stabilize your condition until you can be extracted, and law enforcement officers to control traffic and keep spectators away. When you get the bill, you will understand just how expensive it is to hire all these people to save you. There’s a moment of panic and then you smile. That lasts for another minute as uncertainty gnaws away at your confidence. Does your insurance company pay all these bills?

At this point, we come to a point of considerable controversy. With some consistency, the insurers argue these are services for the benefit of the public and paid for out of tax revenue. As such, the local and state governments are not entitled to charge for the services. Put simply, the insurers refuse to pay. This sends the bill collectors to your door. It’s at this point you come to appreciate how vulnerable you are to extortion. The bill collectors make a simple threat. We say you owe this money. Here’s a copy of the city ordinance or state law. If you fail to pay within seven days, we will report you in default and that will wreck your credit score. Continue reading →

According to the Book of Common Prayer we often leave undone the things we ought to have done. It’s a fact of life. In many ways, we are our own worst enemies. Yet, for most everyday purposes, there are no penalties. We do the things we left undone when we have the time. We might never actually catch up with the backlog, but we keep moving forward. Except there are times when the failure produces instant consequences and, no matter how hard we try, it’s impossible to go back and put it right. Let’s be clear about this. The majority of traffic accidents could be avoided if everyone followed the rules of the road and kept a proper lookout. But we are easily distracted, multitasking when we should focus on the driving. This leaves the insurance companies with a bill and a problem.

In a no-fault state, it does not matter whether the insured driver or the others involved were negligent. The insurance company pays out regardless. But this only applies in twelve states. The remainder rely on the law of tort which order the party at fault to pay compensation to the other. So, if you were not at fault, your insurance company collects the compensation from the other driver and, in theory, suffers no loss. But if the other driver was not insured or underinsured, or you were at fault, your insurer now faces a loss. If this was just down to the math, the insurer would calculate a “fair” premium rate increase and slowly recover the loss. But if the insurer put up the rate every time one of its drivers was at fault, many of those drivers would move to a competing company. So the math has to bend to match social considerations. Sometimes, the insurers have to accept the loss. Continue reading →