Lane, they do it because they can. The perfect business model is one where people pay you for something which you never provide. The closer the insurance companies can get to that model the more money they make.
The question is whether they have to do that in order to cut costs and remain in business or whether they're increasing their profit (I include their bonus packages in "profit").
An interesting side note to the issue of denying coverage to people who make such claims is that 20 years ago they weren't able to do that. At that time the tort systems of most states permitted policy holders to sue for actual and punitive damages where an insurance company wrongly denied coverage.
There were a raft of cases where it was proven that insurance companies had instructed their people to wrongly deny coverage and in some of those cases the insureds had suffered greatly because of it, including some instances where their insureds had died because of delayed treatment. The resulting verdicts were very punitive and the insurance companies claimed they were being victimized by greedy plaintiffs, avaricious trial attorneys and an out of control court system.
They started sending little notes with their bill increases to convince people that the higher rates were the fault of others. In addition they paid for publicists to get the most egregious examples published so that every week there was another "welfare mom hits the lottery in court when she wasn't entitled to anything and it's mandating increased insurance costs" story. Many of the stories were distorted and, in some instances, totally fabricated.
After a few years of this the insurance companies lobbied state legislators and promoted voter referendums to ban such suits and to limit the amount of jury awards. The rallying cry to the voters was that it would save them money and prevent abuses.
In most states today you cannot sue your insurance company for damages for denying coverage even if you could prove it was in bad faith. As a result there is really no incentive for them to pay big claims in a fair and timely fashion. If they deny there will be many people who just go away. If the people don't go away the delay in payment is good for the insurance company since they get the use of the money while things settle out. And if, in the end, they lose the dispute then they are simply forced to do what they would have had to do anyway; pay the claim.
The saddest thing about this is that the very people who voted for these laws are the people who get shafted by them. That's how smart the insurance companies are. They stick it to us, we blame their enemies and they profit. Now which political party learned well how to do that?
Here's a hint, same supporters, same publicists, same Madison Avenue spinners...same result. Ed
PS, their books are not open to the public, they don't get sued for antitrust and therefor only they know exactly what their bottom line is. |
