I am not so blind as to think some insurance companies do not manipulate these programs. I worked for medium sized P&C carrier handling property losses. We did just what you eluded to- used the software as a guide. I think you will find that the claims where settlement could not be reached was when a contractor not using any estimating software was involved. These contractors must be paid attention to as they often set thier own prices.
I take exception when someone takes the behavior of one company(or group of companies) and labels all companies in the same industry the same. This is no different than stereotyping based on age, sex, race, etc. The lesson that can be learned from this discussion is that not ALL companies behave in the manner that the companies which gain media attention do.
The documents in question were the famous McKinsey consults. Now that they are openly available, where is the outrage regarding their contents? There is no outrage because there is and never was a smoking gun. There is no trade advantage in the report now as many companies have followed similar advice in structuring their claims departments.
If the industry is so awful (and we are not), why are the complaint ratios so low? This is public information in most or all states. And Allstate’s complaint ratio is just ordinary, unfortunately no better but still no worse than the competition. I am proud of the work I do and proud to represent the company I do.
Granted, Two Cents, that not all companies are paintable with the same brush. The same holds true of consumers, shops, and vendors also.
However, your point of “watching” vendors that “set their own prices” is startling.
Who should set a repair vendor’s prices, if not the vendor; the repair expert, the one conducting the actual repairs and assuming the liability for those repairs?
Insurers set their own prices which vary greatly depending upon the insurer, more than just the actual amounts of coverage. Any web search will prove such. The quality and level of service (and the fine print or lack of exclusions) by the higher priced insurer is usually higher, and so is the higher priced vendor. In other words, you get what you pay for is still an adage that holds true today, possibly more than ever before.
I have found that vendors that do not use the estimating guides are usually much more in touch with the actual costs involved in the repair, and watching their costs much more closely, and providing much more accurate estimates, and finally, repair bills, simply because they don’t use the “guides”. Old fashioned, perhaps, but also thorough.
Again, who should be “setting” those repair vendor’s pricing if not themselves?
Mark1, Insurance claims are not completely free-market. The claimant has a duty to mitigate damages that does not allow them to simply pick the highest price shop or vendor when the prevailing costs are, in general, lower. The insurance company is simply a surrogate for the person claimed against.
In the absence of your insurer paying your parking lot fender-bender on your behalf, don’t you want some sort of reasonable cap on what you have to pay? As your surrogate, your company is entitled to the same protection under law. These reduced costs not only affect the company’s bottom line, they affect the future rates charged for your insurance.
Excuse me, Two Cents, but I didn’t say that the insured should be required to find the best price on repairs.
The insured has the right to find the best VALUE for repairs for his property, and the lowest price may not indemnify him nor restore him to preloss. In fact, most states give the insured the right to choose the repair vendor by law, especially in motor vehicle repairs.
The adjuster should be determining what returns the claimant to preloss condition, without ambiguous terms not in the policy. The software may not do this.
The solution is simple: All the insurer has to do is invoke the right to repair in the policy, and repair the property for the insured, and then return the property to the insured after it is repaired.
Of course, we all know why this does not happen, because the insurer would then assume all liability for the repairs done to the insured’s property.
In the current situations, the repair vendor is assuming the liability for repairs, while the insurer enjoys the low price.
But the mixing of two options under the policy, the option to repair, and the option to pay monies for repair, is taking place.
I have no doubt that this saves the insurer money, but question whether, in the face of record profits, if these savings are actually passed back to the consumer, or if diminishing the value of the indemnifcation sold to a claimant in the name of lowering premiums for all policyholders is a sound practice as well, let alone actually in the policy contract.
Fair Claims Practices and Bad Faith Claims Practices acts apply to insurers.
Fraudulent Claims apply to consumers and insurers alike. (in most states, Texas being an exception)
I know of no state law that states it is an insured’s duty to assist in mitigating the value of a loss. Policy terms and conditions, to mitigate damage and further damage to property, yes, but state law on either value or further damage, no.
I would ask that you post some of these laws of which you speak for review, in that they are public documents.
Respectfully, I don’t believe the duty to mitigate the damages in the policy involves choosing the least expensive repairer. I believe that clause involves protecting the property from further damages, such as exposure to water, and theft, after a loss such as a motor vehicle accident or a tree that falls through a window. The duty of the insured is to secure the property and protect it from further damage, and therefore mitigate the loss.
The assumption that all repairs are the same or that the lowest bidding repair vendor is supplying the same actual repairs and quality of repairs as a higher priced repair vendor, is the problem.
Those software systems that were spoken of do not ensure that first, all the actual damage is written, and second that all the damage was written properly.
The policy promises to indemnify the consumer, not to indemnify the company’s insureds as a whole with lower rates.
I will agree with Mark1 that the insured should be required to find the best price when mitigating damages. During time period following losses, the resources are not available. However, when searching for a vendor for permanent repairs, the insured should do thier part in claim settlement by finding a vendor with reasonable procing.
You misunderstand my point Mark1. The duty to mitigate is found in the Fair Claims Practices Acts in the various states, not in the policies themselves. You are correct in seeing that the insured has a contractual duty to protect the property from further loss. In addition to that however, the claimant has a duty under law to cooperate with minimizing the loss costs in total. This does NOT dictate that they use the cheapest vendor, it requires reasonableness. Admittedly difficult in the heat of a contested claim.
“Fair” is not a one-sided concept.
We have updated our privacy policy to be more clear and meet the new requirements of the GDPR. By continuing to use our site, you accept our revised Privacy Policy.
I am not so blind as to think some insurance companies do not manipulate these programs. I worked for medium sized P&C carrier handling property losses. We did just what you eluded to- used the software as a guide. I think you will find that the claims where settlement could not be reached was when a contractor not using any estimating software was involved. These contractors must be paid attention to as they often set thier own prices.
I take exception when someone takes the behavior of one company(or group of companies) and labels all companies in the same industry the same. This is no different than stereotyping based on age, sex, race, etc. The lesson that can be learned from this discussion is that not ALL companies behave in the manner that the companies which gain media attention do.
The documents in question were the famous McKinsey consults. Now that they are openly available, where is the outrage regarding their contents? There is no outrage because there is and never was a smoking gun. There is no trade advantage in the report now as many companies have followed similar advice in structuring their claims departments.
If the industry is so awful (and we are not), why are the complaint ratios so low? This is public information in most or all states. And Allstate’s complaint ratio is just ordinary, unfortunately no better but still no worse than the competition. I am proud of the work I do and proud to represent the company I do.
Granted, Two Cents, that not all companies are paintable with the same brush. The same holds true of consumers, shops, and vendors also.
However, your point of “watching” vendors that “set their own prices” is startling.
Who should set a repair vendor’s prices, if not the vendor; the repair expert, the one conducting the actual repairs and assuming the liability for those repairs?
Insurers set their own prices which vary greatly depending upon the insurer, more than just the actual amounts of coverage. Any web search will prove such. The quality and level of service (and the fine print or lack of exclusions) by the higher priced insurer is usually higher, and so is the higher priced vendor. In other words, you get what you pay for is still an adage that holds true today, possibly more than ever before.
I have found that vendors that do not use the estimating guides are usually much more in touch with the actual costs involved in the repair, and watching their costs much more closely, and providing much more accurate estimates, and finally, repair bills, simply because they don’t use the “guides”. Old fashioned, perhaps, but also thorough.
Again, who should be “setting” those repair vendor’s pricing if not themselves?
I believe it is only fair that the same regulation that insurance companies face should also be present for other industries(i.e. construction).
Mark1, Insurance claims are not completely free-market. The claimant has a duty to mitigate damages that does not allow them to simply pick the highest price shop or vendor when the prevailing costs are, in general, lower. The insurance company is simply a surrogate for the person claimed against.
In the absence of your insurer paying your parking lot fender-bender on your behalf, don’t you want some sort of reasonable cap on what you have to pay? As your surrogate, your company is entitled to the same protection under law. These reduced costs not only affect the company’s bottom line, they affect the future rates charged for your insurance.
Excuse me, Two Cents, but I didn’t say that the insured should be required to find the best price on repairs.
The insured has the right to find the best VALUE for repairs for his property, and the lowest price may not indemnify him nor restore him to preloss. In fact, most states give the insured the right to choose the repair vendor by law, especially in motor vehicle repairs.
The adjuster should be determining what returns the claimant to preloss condition, without ambiguous terms not in the policy. The software may not do this.
The solution is simple: All the insurer has to do is invoke the right to repair in the policy, and repair the property for the insured, and then return the property to the insured after it is repaired.
Of course, we all know why this does not happen, because the insurer would then assume all liability for the repairs done to the insured’s property.
In the current situations, the repair vendor is assuming the liability for repairs, while the insurer enjoys the low price.
But the mixing of two options under the policy, the option to repair, and the option to pay monies for repair, is taking place.
I have no doubt that this saves the insurer money, but question whether, in the face of record profits, if these savings are actually passed back to the consumer, or if diminishing the value of the indemnifcation sold to a claimant in the name of lowering premiums for all policyholders is a sound practice as well, let alone actually in the policy contract.
Good Hands,
I believe you are in error.
Fair Claims Practices and Bad Faith Claims Practices acts apply to insurers.
Fraudulent Claims apply to consumers and insurers alike. (in most states, Texas being an exception)
I know of no state law that states it is an insured’s duty to assist in mitigating the value of a loss. Policy terms and conditions, to mitigate damage and further damage to property, yes, but state law on either value or further damage, no.
I would ask that you post some of these laws of which you speak for review, in that they are public documents.
Good Hands,
Respectfully, I don’t believe the duty to mitigate the damages in the policy involves choosing the least expensive repairer. I believe that clause involves protecting the property from further damages, such as exposure to water, and theft, after a loss such as a motor vehicle accident or a tree that falls through a window. The duty of the insured is to secure the property and protect it from further damage, and therefore mitigate the loss.
The assumption that all repairs are the same or that the lowest bidding repair vendor is supplying the same actual repairs and quality of repairs as a higher priced repair vendor, is the problem.
Those software systems that were spoken of do not ensure that first, all the actual damage is written, and second that all the damage was written properly.
The policy promises to indemnify the consumer, not to indemnify the company’s insureds as a whole with lower rates.
I will agree with Mark1 that the insured should be required to find the best price when mitigating damages. During time period following losses, the resources are not available. However, when searching for a vendor for permanent repairs, the insured should do thier part in claim settlement by finding a vendor with reasonable procing.
You misunderstand my point Mark1. The duty to mitigate is found in the Fair Claims Practices Acts in the various states, not in the policies themselves. You are correct in seeing that the insured has a contractual duty to protect the property from further loss. In addition to that however, the claimant has a duty under law to cooperate with minimizing the loss costs in total. This does NOT dictate that they use the cheapest vendor, it requires reasonableness. Admittedly difficult in the heat of a contested claim.
“Fair” is not a one-sided concept.