Insurance companies are not in business to pay claims, regardless of what they say in TV ads. They are in business to make a profit, just like any other business. Unlike most other businesses, they are not selling a tangible product in exchange for cash.
An insurance policy is a contract between the insured and the insurer. In most cases, the person who takes out the policy, whether it’s auto, life or homeowner’s insurance, would be just as happy not to collect. The insurance company is always happy not to pay.
How an Insurance Company Makes Money
Insurance companies make money in two ways, from underwriting income and investment income. Their goal is to collect as much money as possible from premiums, pay out as little as possible in claims and invest the rest. In many ways, an insurance company is a vehicle used to generate investment funds. Warren Buffet, no novice in the field of finance, founded the Berkshire Hathaway Insurance Company in order to generate income to invest in the stock market.
Underwriting Income
Underwriting income is the difference between the amount collected and the amount paid out. When someone has an accident, and their rates are increased, that is risk management. Since the driver has been in one accident, the driver is considered to be likely to get into another, so is forced to pay more for coverage.
Investment Income
Investments generate much of the income for an insurance company. They have been known to lower premiums to sell more policies and generate more investment cash or to raise premiums if their investments didn’t do well.
For an insurance company, it’s all about money. No matter how nice the adjuster seems, if a claim involves a substantial sum of money, they will not pay a penny more than they have to. Their negotiators are very skilled and know that their own bosses want them to keep the settlement as low as possible.
Don’t let the insurance company take advantage of you. Let an experienced Car Accident Injury Attorney in Birmingham AL negotiate with the insurance companies for you. For almost 47 years, the law firm of Forstman & Cutchen, LLP has been helping accident victims to receive fair compensation for their injuries. Click here to learn more about how a Car Accident Injury Attorney in Birmingham AL can help you and to schedule a free consultation.
