Ask the Experts

Interfacing With Insurers

A storm hit my hometown over the summer and really did a number on my parents’ house (my old childhood home), particularly the roof. My parents, of course, called up their insurance company right away. But the insurance company was just awful, and didn’t really tell them anything, so they got it fixed themselves and then went back to the insurance company to get reimbursed–only to get more arguments and more denials. It’s been terrible for their finances, which are already a little strained with me in school and the holidays coming up. I’m so frustrated for them, and I don’t understand why insurance companies are allowed to deny claims for little nit-picky reasons. Shouldn’t there be laws against this? How can my parents fight back?

Insurance is something that we want to have but hope never to need, and when we do have to make a claim, the process can be frustrating–and sometimes unfair.

Insurance is a tricky thing, because an insurance company’s job is to balance risk. Insurance companies charge their customers a monthly premium. If everything works properly, the insurance company makes enough in premiums to be able to pay the customers who have legitimate claims while still making a profit for itself. An insurance company won’t have a good reputation if it doesn’t pay for legitimate claims, but if it pays for things it shouldn’t, it won’t last long. And not all insurance companies are huge behemoths, either; the insurance policy administration systems professionals at SimpleSolve say the companies they help are small and mid-sized insurers. Insurance is a business based on risk, but it can also be a risky business for the insurers. If an insurance company assesses risks incorrectly, it will end up owing more than it can pay. And then there’s the very real risk of insurance fraud, which helps criminal customers at the expense of the insurance companies. Insurance fraud costs the industry $40 billion per year (for reference, insurance premiums total over $1 trillion per year).

Of course, that doesn’t mean that insurance companies never try to get away with things they shouldn’t. It’s very possible that the frustration that your parents are feeling is the sole fault of the insurance company they’re dealing with. From simple poor service to outright fraud, insurance companies aren’t immune to bad behavior. They can, and do, break the law, and while it’s not the norm, it’s something that it pays to be aware of.

Roof repairs after a storm should typically be covered by homeowner’s insurance, but it’s impossible to say from your letter alone what your parents’ policy covered. The roofers at AAA Superior say that roof repairs and storm damage restoration experts should be used to working with insurance companies, so it’s not clear why the pros your parents hired didn’t do anything to make sure everyone was on the same page. Ultimately, your parents’ best bet may be to speak to a lawyer. There are attorneys who specialize in dealing with insurance companies. If your parents’ insurers are up to no good, a good attorney could help put things right. And even if this is just a misunderstanding, sometimes it helps to have a legal letterhead on your angry letter! Good luck to you and your parents.

“Insurance business is about promises and trust. It is about delivering to the customer in times of need and if this cannot be imbibed in a professional, neither him nor the industry will succeed.” — Tapan Singhel

Miriam Metzinger is a regular contributor and editor for the financial website, Seeking Alpha.