How Your Insurer Can Turn Against You

When you take out an insurance policy, you automatically assume the insurer is on your side. After all, your policy is meant to protect you when trouble arrives.

If something happens to you and you must claim from your policy, you also assume that your insurer will act in your best interests. You believe they will sympathize with your situation and work hard to get you a payout.

Sadly, during difficult times, your insurer may turn against you. Some insurers rely on bad faith practices to avoid paying claims. This troubling trend leaves policyholders financially vulnerable when they need security the most.

What Does Bad Faith Practices Mean?

Acting in bad faith means your insurer uses strategies to avoid paying a valid claim. You may notice that your insurer is taking a long time to process your claim.

The insurer may also deny your claim from the start without giving you a reason. Sometimes, insurers pressure their clients into accepting lowball settlements so that they don’t have to pay the full value of a claim.

All insurers indeed work to improve and maintain their bottom lines. But, there is a point where these efforts become unethical or even illegal.

Generally speaking, bad faith implies that your insurer has broken their contract with you. They failed to act honestly and to protect your rights.

Common Bad Faith Tactics Insurers Use

If you are not sure whether your insurer is using bad faith practices against you, look out for the following:

An Unexplained Delay in the Claims Process

Insurers typically have a set turnaround time for paying claims. If your claim takes unusually long to resolve, it could mean the insurer is delaying it on purpose.

The longer the insurer takes to give you an answer, the more they hope you will give up and withdraw your claim. This is a horrible way of doing business, but it is also the reality for far too many policyholders in Nevada.

You will recognize delaying tactics if your insurer asks for the same documentation every time you follow up on your claim. They may also ‘investigate’ your claim for weeks without a resolution.

Denying Your Claim Even Though It’s Valid

The terms of your policy should make it clear whether your claim is valid. Despite this, your insurer may deny your claim anyway.

They can do this by misinterpreting policy language on purpose. They may also use ambiguous clauses to excuse not to pay your claim.

In most cases, denying a valid claim happens because the insurer does not want to pay.

Offering You a Lowball Settlement

If you are claiming from your insurance policy, it means you have suffered a loss. You need the money from your policy to cover this loss.

Your insurer might make things more difficult by offering you a too-low settlement. This tactic is called a ‘lowball’ or ‘underpaid’ settlement.

If you accept a lowball settlement, you must pay for the rest of your expenses out of your pocket. This means you keep losing, even though you are insured.

Why Do Some Insurers Act in Bad Faith?

It is ironic that insurers ask you to trust them with your money only for some to turn on you. Unfortunately, several factors drive unethical bad faith practices in the insurance industry. These include:

Maximizing Profits Above All Else

As much as your insurer says they want to help protect you and your assets, they are business first. And, because they are a business, they protect their profits above all else.

Insurers usually balance the premiums they collect with the claims they get. If paying full claims affects their profit margin, they may use bad faith practices to avoid settlements.

If your insurer succeeds with its bad-faith strategies, it will reduce payouts and improve profits. However, they will do this at the expense of their clients.

It is always a bad sign if your insurer prioritizes its financial status over customer service. If you experience this after failing a claim, consult a lawyer.

Reducing Risk and Liability

Insurers may offer high-value insurance policies but risk financial loss if they have to pay out full-value claims. If they deny or delay a claim like this for as long as possible, it helps them avoid immediate financial risk.

Your insurer may deploy this strategy if you claim for extensive property damage or severe personal injury. Considering the value of these cases in cities like Las Vegas, insurers are often tempted to minimize payouts.

Internal Company Targets

Like all businesses, insurance companies have internal goals and targets to reach. Often, these goals include reducing claim payouts so the insurer can maintain a high-profit margin.

If an insurer is pressured into performing according to these goals, they may use bad faith strategies. This systemic problem will become part of an insurer’s organizational culture, and all their clients will suffer for it.

What to Do If Your Insurer Turns Against You

If it is clear that your insurer is using bad faith practices to avoid paying your claim, do the following:

• Make notes of everything, including all communication between yourself and the insurer. Your notes will become evidence if you want to sue the insurer.
• Read your policy to understand it. Don’t scan your policy document. Read everything at least twice to know what your policy covers and what the limits are. If the policy language is confusing, ask a lawyer to help you understand what it means.
• Get legal assistance. If you suspect your insurer is mishandling your claim, hire a lawyer.
• Your lawyer can help you file a complaint with the relevant Nevada regulatory agency. The agency will investigate your claim and potentially act against the insurer.

It is also possible that filing a formal complaint will prompt the insurer to re-evaluate your claim payment.

Be Proactive About Your Insurance Claim

If you are dealing with an unethical insurer, you must act immediately. Speak to a lawyer and get legal advice to turn things around. After all, your financial security depends on a full payout when you claim.