For insurers, getting tough with suspect claims can land them in court, facing billion-dollar lawsuits. If they pay claims too quickly and generously, they can incur the wrath of editorial writers and even face regulatory fines.
So goes the balancing act insurers must perform in dealing with suspect claims.
Case in point: Allstate was sued for $1.43 billion by a Kentucky woman who alleged the company delayed her auto accident claim and then low-balled her. Allstate suspected the claimant had exaggerated her claim. A jury last week took all of 35 minutes to side with Allstate. The company won the case, but likely had to shell out a ton of money to defend it.
Second case in point: Six years ago Erie Insurance received a claim for injuries from a state superior court judge who was involved in a minor car accident. The company paid the $390,000 claim, which subsequently was deemed fraudulent by federal investigators who recently have charged the judge.
Erie Insurance now is being admonished by a Pennsylvania newspaper for paying the claim. Now, I don’t know the details of the claim — and I doubt the editorial writers at this newspaper know either — but I do know that most insurers don’t deny claims lightly. Unless they have solid evidence — especially involving a claim from a judge — they must pay.
To Erie’s credit, they have formed an internal committee to review claims practices.
The fact is, insurers pay thousands of fraudulent claims every year. Some they should have detected and others are nearly impossible to catch. Checks and balances need to be in place — whether they be regulatory fines, lawsuits or oversight by the media — to encourage insurers to be ever vigilant.
They should pay honest claims promptly and fairly, detect dishonest ones accurately and have the wisdom to distinguish the difference.