First let me say that I am not generally a fan of insurance companies nor an apologist for them either!
That said, I do of course certainly recognize the critical need for the services that they provide!
A confusing position I know particularly since I own a company that writes title insurance policies for real estate!
But for those of us who have ever purchased insurance the odds are good that we will likely, at some point, become painfully aware that the basic business model of insurance companies is to collect our premiums and then try to distribute the least amount for a claim to the insured that they can. That’s just business!
Insurance as a product is for the most part forward looking protection for an incident or event that the buyer of the insurance hopes will never occur! Life insurance would be a prime example of this for who among us wants to die? Auto insurance is another because in reality who wants to be in an accident?
An example of backwards looking insurance would be title insurance which provides coverage insuring that no one has a prior claim to a specific commercial or residential property that the purchaser of the insurance is buying.
Now, before we go further, this is a commercial for Liberty Mutual extolling the virtues of a program that they call ‘Accident Forgiveness’ for drivers who ‘qualify’…
After watching that clip, let’s take a quick look at the general business model of property casualty insurers.
From Allstate, ‘In insurance terms, property casualty insurance can also be called property liability insurance. Whatever you call it, what it does is help protect you against financial losses that come as a result of being held legally liable for an accident that causes damage to another person or another person’s belongings. It may help you pay for a person’s injuries or any legal costs you incur as a result of the person being injured on your property due to your negligence. This kind of insurance comes mostly into play with auto, homeowners and even renters insurance.‘
That said, my issue with the advertising of Liberty Mutual is that it seems to be trying to transfer the onus from the person who is responsible for an accident to the insurance company that might take issue with having to pay for the accident.
Insurance companies base the amount of premium that they charge a customer in part on the perceived risk they feel that customer poses to the company’s financial strength due to claims they might make.
It can be based on many factors including demographics like age but, rest assured, when we give them actual proof of increased risk by doing something such as getting into a car accident (auto insurance), premiums will tend go up.
That’s business and if a company claims that they are providing you with a way to avoid a hike in premiums after an accident, I would assume that somehow you are paying for that privilege through some other charges!
Unless of course i’m wrong and I would like to hear about that too!
Michael Haltman, President of Hallmark Abstract Service, New York.
HAS is a provider of title insurance in New York State for residential and commercial real estate transactions.
And, for anyone either buying a property or refinancing, remember that although your attorney will likely recommend a title insurance provider you always have the right to choose your own title company (click here to learn more)!
If you have any questions you can reach Michael by email at email@example.com.