Insurance companies can drop you because you make a claim?

WTF? Is this for real? You have a homeowner's/renter's insurance policy, and a legitimate event happens that you put in a claim for, and they can then opt to drop you later on?

What the holy sh*tf*ck is that all about? I mean, the entire POINT of insurance is to pool resources to cover people in case of unforeseen events (hence all the rules in the policy regarding what can disqualify your claim).

Gods, I hate the insurance industry.

Can I approach it from the other side? Why *shouldn't* they be allowed to drop you? They have no obligation to accept any and all people as customers, do they?

Jonman wrote:
Can I approach it from the other side? Why *shouldn't* they be allowed to drop you? They have no obligation to accept any and all people as customers, do they?

Dropping a customer because they dared to use the service you sold them is a bit extreme.

OG_slinger wrote:
Jonman wrote:
Can I approach it from the other side? Why *shouldn't* they be allowed to drop you? They have no obligation to accept any and all people as customers, do they?

Dropping a customer because they dared to use the service you sold them is a bit extreme.

Is it? If a customer ceases to be profitable to my business, why am I obligated to continue to offer my business services to them?

I'm not saying it's not a dick move (it is), I'm saying businesses are free to make dick moves if they want.

I'm sorry, 'Scry. That is f*cked up.

Jonman wrote:
OG_slinger wrote:
Jonman wrote:
Can I approach it from the other side? Why *shouldn't* they be allowed to drop you? They have no obligation to accept any and all people as customers, do they?

Dropping a customer because they dared to use the service you sold them is a bit extreme.

Is it? If a customer ceases to be profitable to my business, why am I obligated to continue to offer my business services to them?

I'm not saying it's not a dick move (it is), I'm saying businesses are free to make dick moves if they want.

If the free market existed then, yeah, this point is valid. As it is, insurance is a collusionist's game.

Yes, they do this, absolutely. Some of them will drop you even if you inquire about making a claim, but don't actually do so.

Jonman wrote:
Is it? If a customer ceases to be profitable to my business, why am I obligated to continue to offer my business services to them?

I'm not saying it's not a dick move (it is), I'm saying businesses are free to make dick moves if they want.

If having a customer use the service they bought from you causes you to lose money, you're doing it wrong. At the very least you should fire the guy who does your pricing.

The truly hard part is when you trying to get insurance from another carrier after you've been dropped. The rate will be much higher or you might not be insurable.

But that's how risk management is if you're too high of risk then from a company's point of view it's better to pay off the current claim and drop you to avoid further costs.

I worked for a valet company once. He was dropped from his carrier after a bad accident. (car's accelerator got stuck and the car crashed into everything going down the street and ended up in a store) His insurance company payed his claim and then dropped him. He couldn't find another company to insure him at a rate that would leave his business profitable. The owner had to take on a partner to be insured under his name. Cost him a huge chunk of his business for years.

I found out this story after having a couple drinks with they guy. He drunkenly asked me:
boss: "What would you do if a car's accelerator got stuck?"
me "I dunno, probably kill the ignition or shift into neutral"
boss "See you're smarter drunk than that kid was sober"
me "wut?"

It happened to me. Back in 2000 a major hail storm hit and severely damaged my roof and gutters. My homeowner's insurance did a stand up job of paying to replace the roof and gutters, but sure enough at my next renewal my rates almost doubled. The next year they said they were dropping me, along with a good portion of other homeowners in my area.

H.P. Lovesauce wrote:
I'm sorry, 'Scry. That is f*cked up.

Fortunately it hasn't happened to me (yet), I was avoiding derailing a separate thread on GWJ with my outrage.

Duoae wrote:
If the free market existed then, yeah, this point is valid. As it is, insurance is a collusionist's game.

Bingo. This is a bullsh*t "business model."

Is this problem more common for some types of insurance than others? Stories like these make me paranoid every time I make a health insurance claim.

I've only heard of this being a serious issue in homeowner's insurance. It may happen in other lines of insurance, but I haven't heard about it.

It can happen with car insurance, but that's more likely to be caused by something the policy holder will sheepishly admit that, yeah, it's likely their fault.

Robear wrote:
It can happen with car insurance, but that's more likely to be caused by something the policy holder will sheepishly admit that, yeah, it's likely their fault. :-)

Back before I was married, my car insurance was lazy about checking my driving record. When I first got married and added my wife to my policy, they checked and noticed 11 points on my license (limit before having license revoked in MI was 12 points at the time. Yeah, I was a sh*tty driver in my early 20s). They instantly dropped me, and their competitor gouged me for the 6 months it took for all the points to fall off.

(Then they took me back to the same rate I had before.)

Robear wrote:
It can happen with car insurance, but that's more likely to be caused by something the policy holder will sheepishly admit that, yeah, it's likely their fault. :-)
It can also happen with malpractice as well(source Pater Familias, MD).

The problem is that most insurance pricing is set by actuarial models, not by throwing darts at a board or collusional price-gouging. So when they establish a price for your homeowner's insurance, it should be based upon a statistical analysis of the likelihood of certain damages to the home based on a long-term historical model.

Now let's say they establish that price, and then down the road a hailstorm damages your home. Well, that was accounted for in the statistical analysis. Does a single hailstorm drastically alter the long-term hailstorm/damage average to the point of doubling or tripling your insurance premium? It shouldn't. Maybe at the end of the year when they re-run the models to determine any adjustment to your premium, it might signal an uptick, but it would be a fairly small one.

Hence my objection to this bullsh*t business practice. It exposes the insurance industry for long-term con job that it is.

In many cases, it might be better to self insure. I am not sure of the legal barriers to doing that, however.

We are talking about not renewing the coverage—not outright rescinding the policy—right?

Farscry wrote:
The problem is that most insurance pricing is set by actuarial models, not by throwing darts at a board or collusional price-gouging. So when they establish a price for your homeowner's insurance, it should be based upon a statistical analysis of the likelihood of certain damages to the home based on a long-term historical model.

Now let's say they establish that price, and then down the road a hailstorm damages your home. Well, that was accounted for in the statistical analysis. Does a single hailstorm drastically alter the long-term hailstorm/damage average to the point of doubling or tripling your insurance premium? It shouldn't. Maybe at the end of the year when they re-run the models to determine any adjustment to your premium, it might signal an uptick, but it would be a fairly small one.

Hence my objection to this bullsh*t business practice. It exposes the insurance industry for long-term con job that it is.

But when you make a claim, you are affecting the acturial numbers. Like it or not, people that make a first claim are significantly more likely to make a second claim than someone who hasn't made a claim making their first claim. And worse, you've moved right along the timeline towards your death, meaning less possible income to pay for another claim.

Jayhawker wrote:
But when you make a claim, you are affecting the acturial numbers. Like it or not, people that make a first claim are significantly more likely to make a second claim than someone who hasn't made a claim making their first claim.

That's only true if the claim was made due to some action or inaction on the part of the claimant. For homeowner's insurance and freak windstorms or whatever, that's absolutely not true. The event might factor into calculations of the chance of future events like that in the area. But it doesn't mean that individual is more likely to get struck a second time.

Hypatian wrote:
Jayhawker wrote:
But when you make a claim, you are affecting the acturial numbers. Like it or not, people that make a first claim are significantly more likely to make a second claim than someone who hasn't made a claim making their first claim.

That's only true if the claim was made due to some action or inaction on the part of the claimant. For homeowner's insurance and freak windstorms or whatever, that's absolutely not true. The event might factor into calculations of the chance of future events like that in the area. But it doesn't mean that individual is more likely to get struck a second time.

I don't think they actually look at the type of claim when they do these calculations, but I could be wrong. You're simply moved into a new demographic which is more expensive to insure.

Malor wrote:
Yes, they do this, absolutely. Some of them will drop you even if you inquire about making a claim, but don't actually do so.

I can second this. I once made an inquiry about a potentially expensive issue with our home. I wasn't even sure if it would be covered, so I called the insurer to ask. Never filed a claim. The next annual bill came up with substantial increase. I dropped them and went with another, more reasonably priced carrier.

In insurance, you pay money to offset risk. Said money, your premium, is a rate set by accessing factors about you and your insurable interest and determining the risk.

If you do anything that increases your risk pool, like in the case of driving getting moving violations, your risk increases and thus your premium. If you frequently engage in such behavior you can and will be dropped.

Some companies do take it too far, but I can't really see much complaint to be had. If you build your house on a flood plain, you'll pay more than someone who doesn't. It's pretty sensible.

On a side note, in health insurance, I'm highly in favor of a fat/smoker/alcohol premium tax.

bandit0013 wrote:
In insurance, you pay money to offset risk. Said money, your premium, is a rate set by accessing factors about you and your insurable interest and determining the risk.

If you do anything that increases your risk pool,

That's not what Farscry is talking about. Farscry is talking about (I think):

--when you behave as a homeowner/renter exactly the way your risk pool is set up to take into account;

--an event (1) of exactly the kind you bought the insurance in case of (2) over which you have no control;

--occurs, and they still drop you because you used your insurance.

I work a different area of insurance, but I could imagine a world in which a high-volume model would see policyholders who understand the system as larger risks to insure.

CheezePavilion wrote:
bandit0013 wrote:
In insurance, you pay money to offset risk. Said money, your premium, is a rate set by accessing factors about you and your insurable interest and determining the risk.

If you do anything that increases your risk pool,

That's not what Farscry is talking about. Farscry is talking about (I think):

--when you behave as a homeowner/renter exactly the way your risk pool is set up to take into account;

--an event (1) of exactly the kind you bought the insurance in case of (2) over which you have no control;

--occurs, and they still drop you because you used your insurance.

Yup, this is what I'm talking about. I see no issue with upping your premiums if it's because of risky actions on your part. And yes, I consider risky health issues like Bandit pointed out (even though it would mean I would pay more for my health insurance due to being overweight) fair game for increasing one's premiums.

However, insurance that is meant to cover incidents entirely out of one's control is a different matter. And in that regard, Jayhawker made a good point that I hadn't considered (factoring in the "you haven't made any previous claims" as a bonus discount of sorts, as it could imply that you're simply not one who bothers to make claims except in the most dire of circumstances).

Farscry wrote:
CheezePavilion wrote:
bandit0013 wrote:
In insurance, you pay money to offset risk. Said money, your premium, is a rate set by accessing factors about you and your insurable interest and determining the risk.

If you do anything that increases your risk pool,

That's not what Farscry is talking about. Farscry is talking about (I think):

--when you behave as a homeowner/renter exactly the way your risk pool is set up to take into account;

--an event (1) of exactly the kind you bought the insurance in case of (2) over which you have no control;

--occurs, and they still drop you because you used your insurance.

Yup, this is what I'm talking about. I see no issue with upping your premiums if it's because of risky actions on your part. And yes, I consider risky health issues like Bandit pointed out (even though it would mean I would pay more for my health insurance due to being overweight) fair game for increasing one's premiums.

However, insurance that is meant to cover incidents entirely out of one's control is a different matter. And in that regard, Jayhawker made a good point that I hadn't considered (factoring in the "you haven't made any previous claims" as a bonus discount of sorts, as it could imply that you're simply not one who bothers to make claims except in the most dire of circumstances).

Actuarial tables don't see risk in terms of whether it's your fault or not. There's a % chance they think something will happen. It could be a tiny chance in the model, but if it does occur, suddenly that model can be thrown way out of whack, needs to be re-evaluated etc. Safest thing to do is to pay the claim and cancel the insurance until you can figure it out. Actuaries, if you don't know any, are the most conservative creatures on this planet.

Doesn't mean I think it's right, but that's how it happens.

Farscry wrote:
However, insurance that is meant to cover incidents entirely out of one's control is a different matter. And in that regard, Jayhawker made a good point that I hadn't considered (factoring in the "you haven't made any previous claims" as a bonus discount of sorts, as it could imply that you're simply not one who bothers to make claims except in the most dire of circumstances).

I'm also thinking about the "discourage people from making claims by putting them in fear of being dropped" angle.

Heck, they could charge you more/drop you for making *any* insurance claim with anyone for any reason on that basis: people who won'twill be easily intimidated I bet are cheaper to insure than people who will stand up for their contractual rights.

bandit0013 wrote:
Actuarial tables don't see risk in terms of whether it's your fault or not.

edit: Some do, some don't. Depends on the type of insurance (or else we're misunderstanding each other when we say 'fault').

There's a % chance they think something will happen. It could be a tiny chance in the model, but if it does occur, suddenly that model can be thrown way out of whack, needs to be re-evaluated etc. Safest thing to do is to pay the claim and cancel the insurance until you can figure it out. Actuaries, if you don't know any, are the most conservative creatures on this planet.

Doesn't mean I think it's right, but that's how it happens.

That's the thing: this isn't actuarial science, this is actuaries doubting their own science.

As for upping the premiums for risky behavior, be careful what you wish for: "Lung cancer is a cheap disease to treat because people don't survive very long," van Baal said. "But if they are old enough to get Alzheimer's one day, they may survive longer and cost more."
http://www.nytimes.com/2008/02/05/he...

I learned everything I know about acturial tables from Fight Club.

Seth wrote:
In many cases, it might be better to self insure. I am not sure of the legal barriers to doing that, however.

Do you mean self-insure as in "I have enough money to replace anything/cover any litigation against me as a result of something happening on my property"? Because I doubt most people with a mortgage have that money. Also, don't most lenders require home insurance to get a mortgage?

I can totally see self-insuring for life insurance, personal property, and renter's insurance... but I know very few people who are wealthy enough to even attempt to self insure their auto (if it was allowed), health, or home insurance.