Accidents are inevitable. And because they're unpredictable, accidents are difficult to plan for.
This thought of the unknown is enough to cause anxiety in anyone, but most of us find solace in preparing for the damages caused by an accident by purchasing insurance.
Most of us choose some type of coverage we think we need, whether it's auto or life or health insurance, and we pay a premium for that coverage. We pay for coverage - usually hoping we'll never have to use it - thinking that if we need it, we'll get it.
But the reality is that you don't always get what you pay for. When it comes time to use your insurance, insurance companies will often pay you far less than the coverage you bought - if they pay at all.
Insurance companies have an arsenal of excuses they use to justify not giving you what you want, but one strategy is increasingly used: post-claim underwriting.
What is underwriting?
To understand post-claims underwriting, you must first understand how insurance companies work.
Insurance companies operate under the margin of risk, not only because they insure against risky situations such as driving, but because they are taking a risk that if a claim is filed.
Recognizing the risk of potential claim payments is an important step in an insurance company's decision to provide coverage. Known as underwriting.
Through the process of underwriting, an insurance company attempts to minimize the role played by the assumed act in assessing the risk it agrees to assume.
They can do this in a number of ways including asking questions on an application for insurance or checking a person's health history. Effective underwriting eliminates applicants who are poor risk takers, which increases the amount of potential profit from those with less risk.
But underwriting and risk assessment are costly operations that ultimately erode the amount of potential profit.
To avoid the costs associated with underwriting, insurance companies engage in what is known as post-claims underwriting.
What is post-claim underwriting?
An insurance company engaged in post-claim underwriting does not attempt to identify the risk an applicant is exposed to before agreeing to insure them.
Rather, the insurance company simply issues a policy with little or no investigation or inquiry about the customer.
This insurance company to collect the profit immediately on the premium paid by the applicant.
They will continue to collect these benefits until a claim is filed by the insured with very little effort. It is at this point – after the claim – that the insurance company will begin a thorough investigation to discover any reason for denying the claim.
Post-claims underwriting thus works to prevent eligible, pay-in customers from receiving the benefits they are paying for.
How is post-claims underwriting done?
he post-claims underwriting investigation usually begins and ends with the application you fill out for insurance. Insurance applications can be a trap for unsuspecting consumers.
If you've ever applied for insurance, your instincts may have told you that something didn't feel right.
The reality is that insurers often ask their customers to answer questions that are deliberately designed to be confusing and to encourage mistakes. Insurers do nothing to ensure that customers understand what these questions are asking, which often leads to answers that are inappropriate or inadequate.
The purpose of the post-claims underwriting check is to uncover any discrepancies between the facts and your answers on the application. Any discrepancy usually leads to a denial of your claim.
Take for example an application for health insurance.
An application for this type of coverage may ask a vague question such as "Are you in good health?" The application may then be limited to a simple "yes" or "no" answer.
Applicants can select "yes" assuming that they are in good health as they have not had any health problems for some time. Let's say some time later, the applicant has a heart attack, survives, and tries to file a claim with his insurance company to cover the medical expenses incurred.
What the insurance company would then do—post-claim—is check whether the applicant was actually in “good health” at the time of applying. They will review the applicant's medical records searching for any medical ailment that could be subjectively viewed as indicative of poor health.
In the case of a heart attack victim, it could be as minor as medical records indicating a small stop of high blood pressure. The insurance company will then use this information to deny coverage.
For a free legal consultation, call 866-481-5503
How do I protect myself against post-claims underwriting?
It is important to remember that insurance companies are a business, and like any other business, they must make money in order to survive. To do this, they will stop at nothing.
Laws have been passed in an attempt to prevent post-claims underwriting, but the reality is that it still occurs.
You can protect yourself with post-claim underwriting by getting involved in the insurance application process.
Ask questions if you don't understand the application. Let the insurance company do its job.
But sometimes this may not be enough. If you find yourself involved in a post-claims underwriting situation, it may be best to contact an attorney who has experience dealing with insurance companies.
Please feel free to contact us with any questions. You can reach us in one of these 3 ways:
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