Auto Insurance: A Real Racket
Auto Insurance: Part of a series on corporate greed
Similarities of Auto Insurance to Other Types
Just as with homeowners’ insurance, auto insurance policies are difficult to decipher, being full of the same loopholes, exceptions, deductibles, exclusions and legal gobbledygook. The main difference between the two types is the expense. Auto insurance costs much more than homeowners’ insurance by proportion.
Those irritating deductibles are also ‘stepped’ in the same way—forcing you to choose between accepting either some risk or a lot of risk—whether you want to or not. I don’t believe there is any such thing as a policy with a zero deductible: if there were, the general public probably could not afford it.
As with homeowners’ insurance, you are pretty much forced to carry auto insurance. It is state law. In most states, you cannot even register your car without providing proof of insurance. Only the super-wealthy can get away without an insurance policy, and then only by posting a bond with the state’s motor vehicles department, indicating they have enough cash to cover anything that might happen if it were their fault.
It is perfectly reasonable to hold people accountable and expect them to pay for any and all damages they may have caused.
It is not reasonable to charge extra to the policyholders for damages done to them based upon someone else’s irresponsibility in failing to obtain auto insurance. Yet, this is common practice. All insurance companies offer an extra-cost provision called “uninsured motorist coverage.”
Now, why should I pay extra for someone else’s failing? If they ran into me, and did not carry insurance, then they broke the law, not I. I am already paying for insurance—it should cover whatever happens, and not cost any extra on the monthly insurance bill because another party decides to flout the motor vehicle laws.
This was brought to the fore in 2008 when my truck was totaled by a 20-something using my truck for her brakes.
How Uninsured Motorist Coverage Does NOT Work:
At first, there was a contact from her insurance, then, I’m not sure what happened, but my insurance suddenly stated that they “could not get my deductible back because the other party was not insured.”
First the party that hit me provided ‘evidence of insurance’ at the scene. Then all of a sudden, they were ‘uninsured?’ Hmm…perhaps they had been insured, and allowed the policy to lapse. Many people do that when they cannot afford the rates they are billed. They will buy a policy and hold if for a month or two, just long enough to get their vehicle registered, then let the policy expire to save money.
These kinds of people are usually totally broke, with no assets, and renting, not buying, their home, so even if you sued them and won, you probably would get nothing.
Now, my "uninsured motorist coverage," (for which, as explained earlier, I had to pay extra), paid something toward replacing my truck, but not nearly enough to replace the vehicle that was destroyed.
Full-Coverage Insurance Debunked Yet Again
Again, just as with the homeowner’s policy incident, we got rooked. The truck that was totaled was a 1999 vehicle with less than 40K miles on it!
We proved this to the insurance company with the receipt from the oil change we'd had done immediately prior to that weekend trip. The rest of the truck was cherry—not a scratch on it, no dings or dents! We bought it in the year 2000 with less than 3K miles on it—it was essentially a brand-new truck. (The dealership had used it as a dealer demo, so they had to sell it as used instead of new, but it had never been out of the dealer’s ownership.)
We had, at our own expense, added a high-top camper shell (which was not damaged in the accident); a brand-new satellite radio system had been installed the previous year; for ‘shoes’ it wore 4 very-nearly-new heavy-duty tires; the interior was spotless and without wear; we’d had to add after-market air conditioning, as it had not come with a/c.
(We had discovered this on a previous vacation trip across the country in the middle of a heat wave in August, and on our return had the a/c installed.)
Truck Totaled With Damage That Seems Fixable
The gal who hit me claimed not to be speeding. I do not and did not believe her statement. From where she went off-course to the point of impact was a distance of only about 15 feet, but she was and had been already moving, whereas I was moving slowly, in the middle of a turn. The right front wheel area of my truck was where she hit She was driving a compact car: a VW Jetta, yet she did all this damage to my truck:
- the bumper was bent back and under
- the front fender/quarter panel was smashed
- the wheel was folded partly under the truck, bending the A-arm
- the passenger-side and driver's side floorboard buckled
- my truck was shoved almost 10 feet, so I ended up almost against the curb on the corner
- the engine was twisted about 15 degrees to the left on its mount
To do this much damage to a larger vehicle than the one you are driving requires a good amount of speed. Since it was not a head-on collision, there would be no multiplying factor in the impact speed.
Here's Where We Got Ripped Off:
The insurance company (our insurance company--supposedly working for us on our behalf!) declined to compensate us at the full value of the vehicle! We looked up on the Kelley Blue Book website that exact truck. With the low, low mileage, and all the add-ons, the value was given at $14K. The insurance at first offered us only $7K. That’s quite a gap! We argued with them, explaining all the extras.
They were unwilling to compensate us for the new upgraded radio; they refused to compensate us for the installation of the a/c, despite our showing the receipt for same, claiming it was “standard” on that vehicle; (obviously not, or we would not have had to have it installed!!); they refused to compensate us for the nearly-new tires, and they claimed that their $7K offer was ‘generous.’
We countered that we needed the truck for our business, and we needed them to either fix our truck (they declined—too much damage), or compensate us fairly to obtain a comparable replacement.
We clearly stated that we did not want to get stuck with an inferior vehicle. The insurer’s reply? “We’re going to do everything possible to make sure that doesn’t happen.” Oh, yeah? How could we tell? That is exactly what happened!
The point of insurance (as stated by insurers), is supposed to be to restore you to your condition prior to the accident. It looks good on paper. It's a lovely theory. It is not, however, the truth.
We pointed out the Blue Book value, and the response was, “We’re not allowed to use Kelley Blue Book.” Well, why not?! We were unable to get a clear and unambiguous answer to that question. Any time you cannot get a straight answer is direct evidence of what amounts to cheating on the part of the corporation in question. In this case, they had some insurance-industry-sponsored agency that did all the vehicle valuations, and they were ‘forced’ to use only that information.
Forced. Right. “Forced,” I’m sure, by their own design in creating such an agency by whatever means necessary, but probably by lobbying for its creation, and then for regulations to do the ‘forcing.’
In the end, we managed to get a whole $9K out of them. We looked for over a month (the time limit on the interim rental car), and a comparable truck was simply not to be found. We did not have enough money to buy the truck we needed, plain and simple. We finally found a truck that was newer by 2 years, but with nearly triple the mileage of our original truck.
Beyond that, while it did have a camper shell (but not a high-rise), and a few more ‘bells and whistles’ (that we did not really need), it was not a full 8-foot bed truck! This made it inadequate for our needs, but we were stuck. On top of that, we had to shell out an additional $2K we could ill afford from our own pocket to cover the difference between what the insurance paid us, and the cost of the “replacement” truck.
Oh, the dealer tried very hard to sell us a brand-new truck instead. We said, “No dice. We don’t buy new vehicles—we let someone else take the depreciation hit. However, if you want to give us that brand-new truck, out-the-door, tax and license included, for only the amount we have to spend from the insurance money, then fine, we’ll buy the new truck.” (How odd that the dealer did not go for that offer!)
Not Even Close to "In The Original Condition"
With the "replacement" (and I use the term loosely) truck, we are not even close to being "restored to our original condition before the accident."
First of all, the dealer had sold us a supposedly "certified" used truck, yet we had to spend an additional $1500 we could not afford on repairs! We had to pay for:
- having the transmission flushed
- having the engine flushed
- having the upper ball joints replaced on the front end.
All of these things should have been done prior to listing the truck as a "certified" used vehicle. Upon complaining to the dealer, we were told to send them the information and bills, which we did, but we were then stonewalled, and they did nothing.
As if that were not bad enough, we had to invest yet another ill-affordable $500 for upgrades to ths suspension system to bring it up to only 'just adequate' for our needs in hauling materials!
That was, then, a total of $4000 above and beyond the insurance "settlement" that we had to pay, and still find ourseslves out our original truck and not even close to 'back where we were.'
We were finally able, after much discussion, to convince the insurance to allow us to go to the wrecking yard and exchange the tires, as the "replacment" had only light-duty tires suitable for a car, but we lost our beautiful (and undamaged) high-rise camper shell, as it was for our original full-size bed truck, and would not have fit the "replacement" truck.
Why Do We Have To Do the Insurance Company's Job?
Since the insurance informed us that the other party ended up not being insured, as I said earlier, it would have been up to us to hire a lawyer and go after them directly. That costs even more money we didn’t have. But, we had paid for our insurance, and shouldn’t it have been the insurer’s job to go after the other party to at least get their own money back? I don’t even understand that concept!
No, wait a minute, here! Why do the insurers feel they have any right to get “their money” back from any payout? In essence, the money they have paid out has really only passed through their hands, from a policyholder paying their own insurance bills, to whatever other party is entitled to compensation. It was not the insurance company’s money to start with!
Since the insurance company would not go after the other party, it ended up that outside of the fact that their car was also totaled, they otherwise got off Scot free. It still galls me! This system is broken, and needs to be fixed.
More Ways the Insurer Makes You Do Their Job
It happened to us again, in 2010! We were legally stopped at a red light, when someone who was not watching the road slammed into the back of us! Fortunately, there was no one in front of us, as we were shoved a good 15 feet into the intersection! Also fortunately, this entire accident was witnessed by a California Highway Patrol officer who was in the lane next to ours, off our left rear quarter. The other driver was ticketed at the scene.
Both my husband and I were injured, although luckily not seriously. Nonetheless, there is a lot more paperwork involved if there are any injuries. A lot more.
Our (replacement) truck was damaged, but this time was at least still drivable, so after receiving first aid at the scene, we continued to our destination, since we were only about 20 minutes away. A week later when we came home, we drove very carefully, so as not to cause any further damage.
This time, at least the guilty party had adequate insurance, so the truck was fixed without undue hassle. Although, it had to be sent back for additional tweaking, and to tell the truth, it is still not quite right!
Chasing Down the "Other Guys"
The matter of the injuries, however, was, and is, almost a year later, an ongoing pain in the drain. It seems that while the insurance paid some of our medical expenses, there was a portion remaining that exceeded our coverage limits. For this, we must go after the other party’s insurance.
Now, again, I have paid my insurance bills in good faith, yet we are expected to do all this chasing down of the other insurer, and do any necessary battling with them over what settlement they may offer. That should all be the job of the insurance company.
They claim, however, that it is “against the law” in our state (CA) for them to send our medical bills, to the other party’s insurance. They say that there are perhaps only 4 states (PA being another), with this law in place. It sounds fishy to me. Even if it is a law, it is a wrong-minded law.
It forces the burden upon the policyholder, adding to the stress from an already stressful event. This is not right. It amounts to not receiving services paid for in advance. Law or not, this needs to change. It is, quite simply, unfair.
We have duly submitted the relevant bills to the other insurer, and predictably, they are dragging their feet. They have no reason to drag their feet. They were forced to accept responsibility as soon as they were notified, given that their client was given the ticket—they have no recourse on which to argue the matter of fault. This accident was clearly their client’s fault, and they are legally bound to pay. Yet, we have yet to hear a word from them. It has been at least a month since they received the paperwork.
They lost no time at all in the beginning, sending us several letters reminding us of a time limit for us to submit our paperwork, even though we called them back twice to let them know we were still waiting on some of it ourselves. But when the tables are turned, they have the paperwork in hand, all of a sudden it is "okay" to take their sweet time and not contact us at all?
This is merely a delaying tactic, and the usual reason for this type of delay (though they will never admit it) is so they can hold onto that money as long as possible, and gain more interest on it in the process.
Another reason they do this is they are hoping to minimize their payout for 'suffering' which is the amount over and above actual bills. Typically, they will lowball the offer. The catch with the delay is this: there is a time limit of 2 years from the date of the accident, and the longer they delay offering a settlement, the more likely it is that the time limit will be near the expiration date, forcing you to accept the lowball offer, instead of having time to demand more.
Therefore, yet more work for you! Not only must you keep on top of everything yourself, but in states where the insurers are not allowed to work with each other directly vis-a-vis medical bills and information, you must now chase down two insurance companies, (or more in the case of multiple-vehicle incidents!), demanding action from each within a reasonable time frame!
And for the "privilege" of doing all the legwork ourselves, we pay our bills monthly, quarterly or annually in good faith? This is not right; it is not fair; it needs to be illegal. In situations where there is no court case resulting, where there is clearly established fault with no basis for contention, they must be made to pay within a more reasonable time frame.
Penalizing the Victims
Insurers will tell you one reason for high insurance bills is the escalation of various fraud schemes. No matter what type of fraud is committed, the end result is that it is the victim who pays: they are treated as guilty unless proved innocent, the exact opposite of the supposed principles in our legal system.
To be sure, these crooks who stage phony accidents are quite sophisticated, and manage to quickly disappear. While some of the fraud involves taking out policies on bogus cars, shady sales schemes and false theft reports, a good deal centers around the faked accidents.
It can also be said that there are times when the victim holds some share of the responsibility for falling victim, by his own inattention to the road or following too closely. Nonetheless, there are other kinds of staged accidents, and it behooves the insurance company to remember that they are supposed to represent their policyholders, and not 'the other guy.' Ergo, they should not (unless other evidence presents itself) treat their policyholder as a liar, but take their statement at face value, and begin their investigation on that premise.
I don't know about you, but I resent paying higher bills and being charged extra for the misbehavior of other people. If you are dishonest, you should pay more, but the rest of us should not bear that burden. It is not our fault that some people are crooks.
Some companies are looking into things like criminal records before granting coverage. It is a step in the right direction, but more needs to be done, such as examining insurance records, to see if someone has, for example, a suspiciously high number of incidents of being hit in the rear--this could be evidence of fraud--where the "apparent victim" is actually the perpetrator of fraud, hoping for monetary gain by slamming on his brakes right in front of other drivers.
What to Do
We will never change any of this by sitting on our collective rear ends and having gripe sessions with the family and the neighbors. We need to spread the word, pass around this information, and complain where it will do some good. So, please, if this angers you as much as it does me, then please share the link to this hub everywhere you can! Call your representatives and demand fair and equitable insurance laws. We can change things, but we have to take action: magic wands remain in the realm of fantasy.
Let's campaign for fair and equitable bills and coverage as befits each individual, based upon their own driving history. Let's campaign for laws forcing the insurance companies to do thier jobs, and not palm off the legwork onto the policyholders. And let's campaign for laws forcing full and fair payouts to fully restore people's vehicles to a true state of "where they were to start with."
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