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Price Gouging with Insurance Premiums: What are You Paying for and What are You Getting?

Chances are you have seen countless advertisements involving a cute little gecko telling you how he can save you 15% or more on car insurance or maybe you’ve noticed the funny advertisements involving a naked man running through a football stadium warning you about the mayhem you could encounter. Both of these companies are advertising for car insurance. Thinking back you probably can’t really see how the advertisements pertain to the quality of their car insurance; however, it is understandable why these multi-billion dollar corporations appeal to the humor of its potential customers. It distracts you from your actual concern, the car insurance itself. What am I getting from this company and is it worth what I am paying?

According to insweb.com, the insurance companies with the highest net premiums include: 1) State Farm; 2) Allstate; 3) Liberty Mutual; 4) Berkshire Hathaway Insurance (including Geico); and 5) Travelers Group. These insurance corporations are likely the most advertised, as well, which explains why they are the largest. The net written premiums per year for these companies range from 20 million (Travelers) to over 50 million (State Farm). State Farm, for example, yielded a net revenue of 3.2 billion dollars. It is estimated that companies such as Geico spend upwards of 6.5% of their premiums on advertising or 900 million dollars. Why does this extraordinary spending matter to you? Because the price is passed along to the consumer and causes you to essentially get less than what you’ve paid for.

Many choose these companies because of the appeal of the advertisements or maybe because they came up on google. These insurance companies usually provide three options, spanning from a low coverage option to a high coverage option. Most Americans in this economy cannot afford to have the maximum coverage on their car, so they will choose a base plan. The base plan will likely provide them with moderate coverage for personal injuries and for uninsured motorist coverage for a price of around $75-85 per month.

You may be asking why does it matter that they have spent millions of dollars on advertising if I have great coverage. Let’s consider a hypothetical. You are insured through a greatly advertised company with their base plan at around $75-85 per month. You have $10,000 per person and 20,000 per accident uninsured motorist and bodily injury coverage. You have been a loyal paying customer for years (paying for those advertisements) when the unthinkable happens and you are injured in an auto accident and the “at fault party” has no insurance. Your insurance company refuses to pay out for some reason or another and you are left with a debilitating injury. This hypothetical begs the question: what duty is owed to you by the company you’ve paid premiums to for so many years?

A problem with these top yielding insurance companies is that they have little concern for their consumers. They pay when they are forced to, but they have no problem cashing the check you send to them every month. Companies like State Farm are booming despite the financial suffering the rest of the country is facing. Shouldn’t they then decrease their premiums? Isn’t this price gouging? The answer to both of these questions is undoubtedly yes. Insurance companies instead of reflecting the costs to their consumers by dropping their rates, they raise their rates and supply their shareholders with large dividend checks at the end of each fiscal year. The shareholders are entitled to dividends and are also entitled to the fiscal responsibility of these insurance companies, but not at the cost of the consumer. The insurance companies have a duty to both to provide the service promised and manage the corporation responsibly. However, because many of the shareholders are likely directors and involved in the management of these companies, their policies reflect maximizing profits and not paying out unless absolutely required to.

So what can you do as a small consumer against a large insurance company? Don’t do it alone. If the above hypothetical does unfortunately happen to you or it already has and the insurance companies are giving you a difficult time regarding the benefits you have paid for or rightfully deserve, call an attorney who can help you. At the Sibley Dolman Gipe Accident Injury Lawyers, PA we are on your side and are unafraid of these large corporate insurance companies. Call us toll free at 727-451-6900.