Author Jay Feinman: Insurers play ‘delay, deny, defend’ game with claims

Jay Feinman describes himself as pro-consumer, not anti-insurance. Nonetheless, Feinman pulls no punches in his book “Delay, Deny, Defend: Why Insurance Companies Don’t Play Claims and What You Can Do About It.”

“Insurance doesn’t work when companies delay, deny, defend. When they delay payment of claims to wear down claimants and to increase their investment income, flat-out deny some valid claims in whole or part, and defend against valid claims in litigation to back up the delays and denials, they break their basic promise,” Feinman writes in the book.

InsuranceQuotes.com spoke with Feinman, a professor at the Rutgers University School of Law in Camden, N.J., about his take on the insurance industry’s practices regarding claims.

InsuranceQuotes.com: You write that the handling of claims is viewed as a “zero sum game.” How does that affect consumers?

Author and law professor Jay Feinman emphasizes that your insurance company isn’t your friend — or your enemy.

Jay Feinman: The arithmetic is simple. An insurance company’s largest expense — from half to three-fourths of its costs — is the amount it pays out in claims. Every dollar that an insurance company does not pay out in claims is a dollar added to its bottom line. Therefore, the company has an economic incentive to deny payment of valid claims to its customers. An insurance company also invests its customers’ premiums and keeps the investment income. The longer it can hold onto the premiums by delaying payment of claims, the greater the investment income.

InsuranceQuotes.com: If claims are viewed as a profit center, doesn’t that violate the contract between the insured and the insurer?

Feinman: It certainly can. The insurance company has made a promise to its policyholders, to pay what it owes under the policy, promptly and fairly. Looking at claims as a source for profits violates that promise.

InsuranceQuotes.com: How has the role of the insurance adjuster changed in the claims process?

Feinman: The traditional role of the adjuster was to pay what the company owed — no more, but no less — and to use discretion and judgment to treat the consumer fairly. Now, adjusters are part of a system, soldiers in a bureaucratic army, the purpose of which is no different than any other part of the company: to advance the company’s financial goals.

InsuranceQuotes.com: Why is auto insurance the largest opportunity for the “delay, deny, defend” strategy?

Feinman: Quite simply, because there are a lot of auto claims. Some of these are catastrophic, with large amounts of money at stake; if the company can reduce the value of those claims, it can realize substantial savings. At the same time, there are many more small claims, and saving a few dollars on each of a large number of claims adds up, too.

InsuranceQuotes.com: Company advertising wants us to believe that our relationship with our insurance company is one of neighbors or friends, but you caution that the company is not your friend. How can the consumer find a balance in dealing with the company when there is a loss?

Feinman: Your insurance company is not your friend, but neither is it your enemy. Your insurance company is a business, and as a business, it has to make a profit. Because the company is not your friend, you have to look out for yourself when filing a claim. Because the company is not your enemy, you should look for ways to cooperate with the company. Most of all, the company has a special responsibility to you because you purchased a policy for financial security and peace of mind, and you should insist that it live up to that responsibility.

InsuranceQuotes.com: How can the consumer protect himself or herself from “delay, deny, defend” tactics?

Feinman: When you have a claim, there are three basic lessons to remember. First, understand your coverage. Read your policy, consult reliable sources and ask questions. Second, understand the claims system. Act as if the company will live up to its obligations while being on guard that it will not. Fully document your loss and your interactions with the company. Go up the company hierarchy, from the front-line adjuster to the supervisor to the manager, if you’re not satisfied. Third, get help if you need it. If you have a serious personal injury claim or a major property loss, you need an expert to help you through the process, so get an experienced attorney or public insurance adjuster.

–Retha Fielding