The Psychology of a Claim (Part I)

After a major loss, most people experience many of the same emotions they would expect were it a death in the family instead. They feel a sense of disbelief, denial, fear, anger, resignation, and depression. In all their emotions, they never count on one thing that frequently happens; “psychological warfare” waged upon them by their insurance company.

The first thing I remind my clients of is that insurance companies are business entities. They are in business to make money. And they are most profitable when they collect premiums from people like you and me and can keep that money invested. They are least profitable when catastrophic claims occur and they are forced to pay the policy limits on those claims. So, quite naturally, they have become very good at avoiding the financial pain caused by paying more than they absolutely have to pay.

As a Tennessee public adjuster, I advise my clients that their insurance company studies statistics on everything. Statistics on how long it takes someone to call after an auto accident to how likely a person is to die based on their personal habits. In other words, they study people’s behavior, and then they use that knowledge to manage their response to each type of claim psychologically.

Did you know that your insurance company knows with statistical certainty, how likely you are to accept their first offer without question? A significant majority of insured’s take what their insurance company initially offers them without argument. If only 20 percent of those who incur a loss are going to question or argue the size of their settlement, why would the insurance companies pay everything in the first check? They save a tremendous amount of money by paying 60 or 70 percent of what they should, knowing that only a minority of families are going to ask for more money.

One way that insurance companies are able to do this is by understanding human nature. Let’s assume you had a beautiful home and while you were out shopping your ten-year-old son, playing with fireworks in his bedroom, accidentally burns your house down. It’s unfortunate, and it’s clearly accidental but know this: the objective of the adjuster assigned to your claim is to settle the claim to your satisfaction as cheaply as he/she can. It is not their job to volunteer any more than they have to in order to get your claim settled.

So, how does this adjuster save the insurance company money? He will interview you, your son, and anyone else relevant to the loss. He will question you about possible motives you might have had to want a fire like that to happen. He will make sure you had no conceivable motivation to want a fire like that to happen. It will feel a lot like you are being investigated for arson or insurance fraud. (Remember, his job is first to make sure that a claim is legitimate and I have no argument with that, but there is a limit to that kind of approach). You also need to realize that even though your son didn’t do it on purpose, you will, naturally, have a sense of remorse about the negligence that caused the accident. If the insurance adjuster can cause you to feel any insecurity or additional guilt about the claim, he has taken you one step closer to getting you to accept something less than a full settlement. Why? Because you are in a weakened state of mind and less able to resist this kind of tactic.

If I can offer you any advice on how to keep your insurance company from manipulating your emotions, it would be this:

1. Insist that your insurance adjuster put everything in writing. Verbal offers are not binding, and when it comes to claims, there is often a great deal of difference between what they will say and what they will put into writing.
2. Get the full benefits of what your premiums paid for. You’ve lived up to your end of the deal now it’s time for them to live up to theirs. So don’t allow any insurance adjuster to make you feel guilty about your loss. Get everything you’re entitled to and don’t allow them to psychologically intimidate or pressure you to accept anything less.