Insurance Dirty Tricks Exposed

Document Sample
Insurance Dirty Tricks Exposed Powered By Docstoc

This document is copyrighted by The author gives you
permission to distribute this document "as is" and with NO changes made. Copyrighted
Information must remain "as is." You are NOT allowed to make changes to this
document but you can freely give it away

We can all relate to the story of David and Goliath. We cheer for the underdog
and have disdain for "Big Brother." History is riddled with
stories of repeated injustice where the strong take
advantage of the weak.

This following report is an accounting of the Auto
Insurance Companies and the government bureaucracy
that enables them to injure the consumers who are at
their mercy.

The information contained in this report is based on actual accounts from
industry insiders, court records; government sponsored reports, and recognized
authorities. The purpose of this report is to bring these issues to light so that
consumers can understand the dirty tricks played on them by the Auto Insurance
companies, which strive to further its own interests, and injure consumers in the

Is your insurance company as customer friendly as they
would have you believe? We’ve uncovered evidence that
should give you reason to be skeptical.
How many insurance policies do you hold? Life insurance, health insurance,
disability insurance, auto insurance and most likely even more than that.

Insurance is one of those items that we hope we will never have to use or deal
with, but the fact that we have it gives us a peace of mind. This peace of mind
makes paying for it palatable to us. But when we have to utilize our insurance,
we often find that it’s a rough, slow-moving, and stressful process that takes a lot
of time, and often produces results that leave us underwhelmed with the
protection that we have paid so much money to maintain!

Other than health insurance, auto insurance is the policy that we are most likely
to utilize. As with all insurance companies, their goal is to maximize their
savings and minimize your payout. While some companies are operating with
ethical business practices, some may be using dishonest practices to save
money while putting YOU in danger!

What kinds of parts are they using when they repair your car? Is the information
you’re receiving in alignment with state law?

They “recommend” that you use their DRP – Direct
Repair Program. Use it at your own Peril!

Have you heard of a DRP? If you have ever been involved in an automobile
accident where your vehicle required repair, your insurance company or theirs
may “recommend” to you one of their authorized repair facilities. You have
probably seen the commercials of the smiling auto accident victims picking up
their cars from a repair facility,
draped in an almost heavenly
white background with an
attractive young man handing
the smiling women her keys. It’s
as simple as dropping off the car
and picking it up with no money
out of pocket, according the

The real truth about these direct
repair facilities is often quite
different.    It  doesn’t   seem
unreasonable that insurance
companies         would       form
partnerships with repair facilities.
After all, volume and frequency of business often has benefits in any business
relationship. The problem with these facilities is within the agreement. Auto
insurers know that there are no federal laws and very few state laws that give
any mention to quality of repair.

There are guidelines by independent agencies, but many of these agencies are
governed by the insurers. So cutting corners on repairs may not be ethical, but in
most cases it’s difficult to call it illegal.

These DRP agreements often strong-arm repair facilities into cutting corners in
their repair practices. What if your repair facility told you that they used salvaged
or aftermarket parts to repair your vehicle?
Aftermarket parts are equivalent to the generic version of a name-brand drug.
Often they work just as well, but knowing that the parts aren’t OEM (original

equipment manufacturer) parts, could decrease the overall value of your vehicle
and most of us, if given the choice, would prefer to have parts with a proven track
record of safety.

Salvaged parts are different. These are used parts taken from cars that were
discarded for some reason.
These parts may have been
involved in an accident or on a
car that was so old that it was
send to a salvage facility. It
would be inaccurate and too
general of a statement to say
that salvaged parts were
always unsafe, but there is a
larger issue with this.

When you drop your car off
with one of these DRPs, you
are largely removed from the
repair process. You no longer
have input as to what is
installed on your vehicle and
you’re trusting not only your
safety but your family’s safety to an insurer and their hired repair facility.

In most business relationships, a "hands off" relationship such as this would be
inappropriate. It’s your car and it’s YOUR life, so not only should you be
involved in the process, you should dictate it! But one of the ideas behind these
“no hassle” repair arrangements is to remove you from the process as much as

The insurer is required to make you whole. Your car is required to be restored
to the condition it was in prior to the accident, so cost cutting with inferior
and sometimes unsafe parts isn’t appropriate.

Remember that in most states you are under no obligation to use a DRP.

There is more to the DRP issue than just the facility itself. Having these
partnerships with repair facilities is only beneficial and lucrative if you are using

these facilities. Most states do not require you to use a DRP, but insurance
companies won’t necessarily tell you that. They will often “steer” you to these
facilities by using deceptive wording.

The most common one that you have most likely heard, is the "guarantee." Some
insurance companies will tell
you that if you don’t use one of
their authorized repair facilities,
they won’t guarantee the
repairs. While the word
“guarantee” is a word familiar
to all of us, (they didn’t choose
that word by accident) our
mistake is that we don’t know
about the specifics of the

The truth is that the insurer
doesn’t guarantee the work!

Under most states' common law, the repair facility performing the work is the
entity making the guarantee and as you have probably figured out, this means
that you could take your car to any repair facility for the same guarantee. Even if
it were true that the insurer guarantees the work of the repair facility, would
parting the red tape of a large insurance Company located in some other state be
easier than dealing with the local repair shop only miles from your home? You
can’t spend weeks resolving a dispute with an auto repair facility. You need your
car today.

They do, however, guarantee the parts ... but only partly. Reviewing insurance
companies’ DRP agreements, most only guarantee aftermarket or salvaged
parts. They do not guarantee original manufacturer parts. Even then, for the
parts they do guarantee, only the fit and anti-corrosion properties are
guaranteed. The actual performance is not.
Other DRP agreements state that insurance companies guarantee the
performance of the part, but only after the claimant has exhausted attempts to
have the manufacturer repair or replace the part under its own warranty. Makers
of aftermarket parts are typically located in Asia, and enforcement of a warranty
is extremely difficult.

Do you own a Frankenstein Car?
The last shocking practice that some insurance companies use is the practice of

Let’s assume that you were in a front end collision. We’re glad that you’re OK,
but the front end of your car is not. If you know much about cars, you know that
replacing an entire front end is very expensive. As a way to combat this cost, the
insurance companies ask their approved facilities to cut a front end off of a
salvaged automobile and weld it on to your car.

This is much less expensive, but is it safe? Insurance companies say "yes" but
it’s hard to find a repair facility that considers this a quality repair. One could not
imagine that the vehicle is as safe as it was before the new front end was welded

It’s important to keep in mind
that often these DRPs are not
customer friendly, but they
are also not repair shop friendly
either. They are often very one
sided in favor of the insurance
company, but for the shop who
sees a large percentage of their
business     originating     from
insurance companies, it’s hard
for them to modify these
agreements in any way.

Even if they are asked to
perform work with substandard parts, if they say "no" they won’t get the business!

What you can do?
Understand the laws of your state. Contact your state insurance board and ask
them to explain or direct you to literature explaining state laws governing the use
of DRPs. Most states allow you to pick your repair facility.

Make sure you receive multiple estimates from repair facilities you trust and go
with the lowest after communicating with the insurance company handling the
payment of your repairs. Make sure to do this before you have to use the
information. Finding the information and putting it in a file folder in case you need
it is a much better option than trying to find this information while driving a rental
car and negotiating with a customer unfriendly insurance company.

If you end up in an accident, E.L Eversman, esq. recommends this: “Look warily
at any insurer's recommendation
of a repair facility because the
insurer is pushing you toward
certain shops for its benefit, not
necessarily yours.

Ask the body shop if it's a member
of the insurer's direct repair
program and, if so, to provide you
with a copy of the document
establishing that relationship and
outlining the repairer's obligations
to the insurer.

Remember,       YOU      are     the
customer in this repair contract and you are entitled to a proper repair from the
shop you select. If any shop balks at showing you the agreement it signed with
the insurer, insist on obtaining a copy from the shop or the insurer directly. If
neither party will produce a copy of the agreement for your records, take your
vehicle to a different shop. After all, if this arrangement is really such a great
thing for consumers, no party to it should have any concerns about showing it
proudly to customers. “

They don’t want to pay you for diminished value. You’re
left holding the bag.

If you’re like most people, you’ve never been upset about the insurance
companies’ diminished value policies because you’ve never heard of diminished
value. Before we explain diminished value, let’s take a look at how the law views
the assignment of value.

When you go to the auto dealership to buy that shiny new car that you’ve
dreamed of having, you first look at the sticker on the car. This sticker lists the
retail price which includes money for
the dealership, the dealer, and other
fees that are built in to the price.

While this could be considered a
measure of value, in the eyes of the
law, it’s not the actual value if fees are
added in. Also, if a car has a lot of
rebates and incentives attached to it,
the true value is most likely the sticker
prices minus fees and minus the
rebates and incentives.

When looking at value, the fair market
value is a more accurate means of assigning value. When you sell your car to
somebody else and each of you agree on a price, this is an accurate assignment
of value especially, when a similar price is negotiated around the world for the
same vehicle. That’s why it is called “fair” market value. It’s fair because two
parties agreed, assuming that each party entered in to the contract under their
own free will.

Have you heard the old saying that the biggest amount of depreciation happens
when a new car leaves the lot? The reason for that is because the fair market
value of a vehicle takes the forefront of valuation and fair market value has a
large degree of emotion involved. There is a large premium for something that is
new. As soon as somebody owns the vehicle, that premium instantly disappears.

This type of depreciation is considered natural depreciation because, much like
all of us age whether we like it or not, cars naturally depreciate whether we like it
or not. Most reasonable people would agree that an insurance company should
not compensate one of their insured persons for natural depreciation of their

There’s another kind of depreciation. This kind of depreciation happens when
something happens to the vehicle. If it was in an accident, it loses value.

To illustrate, let’s assume that you went to an auto dealership and the dealer
showed you two identical cars for an identical price. The only difference between
the two was that one had been in an accident but completely repaired, and the
other had not.

Would you assign the same value to
these cars? If you’re like 97% of
people that were asked this
question in a survey, you would not
view these cars as having equal
value. This kind of depreciation is
known         as        accelerated

This accelerated depreciation is
what     insurers     refer   to   as
"diminished value." When a car is in
a collision, even if it is completely
repaired, its fair market value goes down because most buyers ... 97% in fact ...
view the car as having less value. (We could blame commercials like Carfax
commercials saying that they can "reveal the secret history of our cars" for
contributing to this)

If the job of the insurer is to make the person whole, shouldn’t they
compensate the victim for the diminished value of their vehicle? But for the
fact that this accident occurred, the car would be worth more so the law states
that diminished value must be compensated.

                                                                               - 10 -
Insurance companies don’t want to pay for diminished value, but courts
have ruled that they must. Of course, as one would expect, if they’re going to be
forced to pay it, they are going to try to pay the least amount possible. They do
this by trying to change the payout date. Insurance companies argue that they
should be able to pay the diminished value allowance when the car is sold,
destroyed, or otherwise disposed of by the owner.

In order to understand why, think of the two types of depreciation. The longer you
own your car, the more the natural depreciation decreases the value of your
vehicle. By waiting until you dispose of your vehicle, insurance companies can
argue that the natural depreciation overtook the accelerated depreciation so they
shouldn’t have to pay an allowance for diminished value or if they do, a very
limited amount.

Attorneys, consumers, and government agencies have argued that this makes no
logical sense. If you were injured in an accident, would it make sense for your
health insurance not to pay your medical costs until you died and then argue that
your natural aging overtook the damage from the accident? Insurance companies
will continue to try and pay out the least amount possible for diminished value,
and this complicated issue will continue to be the subject of ongoing litigation.

What can you do?
This is a complicated topic for the layperson to comprehend by reading a single
article. The best thing to do is know when you need help.

Ask your insurance company about diminished value. Get a copy of their written
policy on this and if something doesn’t sound right, seek legal counsel.

Read some online articles about diminished value. If the time comes where you
have to talk to your insurance company about it, you will be prepared.

                                                                            - 11 -
Lying, bullying, and misrepresenting the law is in “the

If you have ever spoken to a claims representative, you may have noticed that
many of their answers sound as if they are being read off of a card. They may
sound like all of their responses are coached and scripted. If that’s what you
think, you’re right!

First, you must understand the varying roles that you take on in an insurance
claim and the importance assigned to those roles. When you are involved in an
                                                   automobile accident, you
                                                   are one of two types of
                                                   claimants: You are either the
                                                   insured, or a third party.

                                                     If you are the insured, you
                                                     are the at-fault driver.
                                                     Maybe you ran in to the
                                                     back of another vehicle and
                                                     were cited by local law
                                                     enforcement as the person
                                                     who was at-fault in the
                                                     accident. That makes you
                                                     the insured. The third party
                                                     is the victim.

                                                       To   reverse     our    fake
accident, you were sitting in your car at a red light when suddenly you felt
something hit the back of your car. The officer at the scene cited the other person
while assigning no fault to you. You are now the third party in any insurance
claim relating to this accident.

As you can imagine, one is treated better than the other. Insurers are not
governed by federal law. Instead, state laws dictate how insurers operate and
nearly all of these govern the relationship between the insurer and the insured.
Very few state laws govern how you as a third part are treated.

                                                                             - 12 -
The third party is viewed as the enemy. Because the insurer has no policy with
you, they have one objective: settle your claim fast and cheap. They will use any
tactics to meet this objective often because there may be monetary incentives
for those employees who save the
insurance company money.

If you have ever been a third party in
a claim, you may have had the “we’re
going to take care of you” line used
on you. They may try to drag your
claim out, they may try to bully you or
even threaten you with litigation if you
don’t settle the claim. You aren’t one
of their customers so you probably
aren’t going to be treated with a lot of

However, state laws often dictate that
the insurer, when dealing with the
insured or first party (the at fault driver) must act in accordance with the written
policy, handle claims promptly (a set time frame is often defined in state law),
handle them in good faith, and pay appropriate compensation when settling a
claim with their insured client. Of course, they will still try to settle the claim as
cheaply as possible, but as an insured person with a contract, your treatment will
be better. They don’t want to lose your business!

What to do…
Make sure to document your accident. Most cell phones have a camera. Use it to
take as many pictures as possible.

When you talk to a claims representative, log their name, time of call and a brief
summary of that call. If you have the technology to record a phone call, do that
as well.

Be as detailed in your records as possible. If your car was totaled, have a copy of
the blue book listing for your make and model and look for comparable sales on

                                                                                - 13 -
places like eBay. Also look for used car listings that would help to solidify the
value of your vehicle.

If your car was not totaled, obtain estimates from at least three repair facilities.
Make sure these estimates are in writing with all company information contained.
Remember that the more documentation you have, the better your case when
negotiating with the insurance company.

If you have any medical issues, have them checked by your family doctor or local
hospital, depending on the severity. Even if it seems relatively minor in nature,
have it checked anyway because once you settle the claim, the insurance
company has no further obligation to pay.

If you feel that the claims representative is not being truthful, or it appears that a
resolution to your satisfaction isn’t possible, seek the help of a trusted attorney
who has experience in dealing with litigation related to insurance claims.

                                                                                - 14 -
The “specialist” isn’t always going to give you accurate
First, let’s be clear: The "specialist" on the other side of the phone isn’t
necessarily giving you misleading information maliciously. He may have been
told by a supervisor to give certain
responses to certain questions,
he may be new or training in a
different area, or he may have
misunderstood the question. Of
course the other option is that he
is, in fact, purposely misleading
you. There may be incentives
attached to closing your case.

Here’s an example:

In Connecticut, A Progressive
claims specialist was quoting an
alleged policy by the state of
Connecticut stating that they don’t
allow insurance companies to sell
policies against diminished value.

Here’s the text of Progressive’s response to a customer inquiry asking for
payment for diminished value:

“At this time, the State of Connecticut, Department of Insurance does not allow
Progressive Insurance or any other company to sell Diminished Value coverage
for a vehicle. As the State doesn’t allow sales of the Diminished Value coverage,
we are not able to afford Diminished value coverage. For these reasons, but not
limited thereto, Progressive Insurance must respectfully deny your claim for
damages. I am sorry that I could not advise you more favorably regarding this
matter, but trust that you will understand our position.”

                                                                           - 15 -
This sounds like a very concise response citing a Connecticut Department of
Insurance policy. If you were like many customers you may take this at face
value and give up. Even if you don’t believe it to be true, you may not know who
to contact, or you may not
understand the response.

The person who received this
response sought legal counsel,
who contacted the Connecticut
Department of Insurance and
received this response:

“(The claims specialist) of
Progressive      Insurance  has
responded that the Connecticut
Insurance Department does not
allow diminished value coverage
to be sold and therefore claims
for diminished value cannot be
made in Connecticut. In response to Ms. Hinckley’s assertion, this is not correct.
The Connecticut Insurance Department does not prevent claims made for
diminished value and an insurer can request to include provisions of diminished
value in their policy.”

The person who originally asked this question had to pay for legal counsel in
order to get the proper answer to this question. The claims specialist may have
been misinformed or coached to provide this false information, but regardless of
the reason, there are a few lessons to be learned from this.

First, always be skeptical. The insurance company is looking out for their
best interests, not yours!

Do your own research, and do not rely on them to voluntarily give you information
that will benefit you. They should, but they most likely will not. Next, like in all of
our examples today, seek legal counsel when you believe that the situation has
become too complicated. You may treat yourself when you have the flu, but for

                                                                                 - 16 -
more serious illnesses you see a doctor. Follow the same example when legal
issues become too complex.

While there is a lot of blame to go
around, if we’re honest, we can’t
simply blame our insurers. Do we
take time to familiarize ourselves
with the policy? Do we know how
to file claims? Do we know what
types of information we should
collect relating to our claim, and do
we have knowledge of the
underlying asset that we are

Of course, it's not possible to
become experts, nor is it practical.
But with some basic knowledge of how insurance companies operate and the
pitfalls to avoid, we can maximize our payout and minimize the frustration that
goes along with our claim.

                                                                         - 17 -
Do I have to pay extra for diminished value coverage?
Answer: You probably do. Much like supplemental coverage (like gap insurance)
you probably need to purchase it, but check with your insurance company.

Is clipping legal?
ANSWER: There are no federal laws and very few state laws that address repair
quality, so "yes", clipping is most likely legal, although you’ll probably find that
independent repair shops (those not in a contract with an insurance company)
will not engage in this practice.

Do I have to use a repair facility recommended by my
insurance company?
ANSWER: No, you’re free to use the repair facility of your choice. The insurance
company may say that the repair isn’t guaranteed but the repair facility will
guarantee it themselves. Talk to your repair facility about this.

What should I do if I believe that                                  the     claims
representative isn’t tell me the truth?
ANSWER: Try to find the answer yourself. Call your state department of
insurance for guidance. If it proves to be inaccurate information and the
insurance company won’t admit to the error, you may have to retain an attorney.

What if an insurance company pressures me to settle?
ANSWER: There’s probably a reason. Don’t settle until you’re satisfied with the
deal. If you’re hurt in any way, don’t settle until all medical issues are cleared up.

                                                                                - 18 -
For more dirty tricks exposed and your rights:

To obtain your free diminished value assessment: (signing up for an
account is free)

Blog Resources on Dirty Tricks (go to "Resource" on the right)

                                                                  - 19 -

Shared By: