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View Diary: According to my home insurance plan (43 comments)

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  •  I began to realize what a scam insurance (4+ / 0-)

    can really be when I worked as tech support for an insurance company for 10 years. They drummed into us that XYZ Company only existed to pay claims! They said that was their primary purpose. Every year they would put out a statement that told us how close they came to being at 100% Loss Ratio. That means they took in X dollars and paid out X dollars. They acted so sad when they would take in X dollars, and only pay out X-Y dollars.

    But how did they make money?

    Investments. This company had such great investments that they held millions of dollars in property that was free and clear. No loans held on most property. If they couldn't buy it outright, they rarely did.

    They were very good at paying claims. But they were just as good at raising your rates the next term. Even if it was a minor claim.

    Basically, they used premium dollars to invest, make tons of money off of it, and then when payout time came, they'd pay it. No problem. Because they had already used your money for the entire year to get very rich.

    When Florida was experiencing a lot of hurricane loss, they would pull out and not reissue policies. If they were getting enough premium dollar to use to invest, and only paying out what they took in, they were happy to cover you. The minute an area's claims started to cut into their investment cash. Bam. Sorry. You're too risky. Before I worked there, they had already stopped covering Florida homeowners to recoup from Hurricane Andrew. Shortly after I started working, they slowly crept back into the homeowner market. By the time I left 10 years later, they were starting to pull out again in 2006 in the face of Katrina. The whole Gulf Coast was being blacklisted.

    "Mitt Romney looks like the CEO who fires you, then goes to the Country Club and laughs about it with his friends." ~ Thomas Roberts MSNBC

    by second gen on Wed Dec 26, 2012 at 04:14:33 AM PST

    •  Why is that a scam? (2+ / 0-)
      Recommended by:
      grover, Villanova Rhodes

      It seems like a mutually beneficial arrangement for everyone.  I'd understand your point if they were trying not to pay claims, but that's not what they're doing.  I'm sure you're not saying that the company should be paying more in claims than its taking in, because that doesn't make any sense.  

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