FunnyBusiness: Everything About Business Except The Bottom Line

Filing an insurance claim can be risky business

"I'd found this flyer in a women's magazine in South Africa. It details the benefits of women-specific insurance, such as road-side assistance, and accidental HIV exposure medication. I thought, "Why is HIV medicine part of car insurance?" It was explained that carjacking and rape isn't all that uncommon. Yikes," wrote Flickr  member Squishy underneath this photo.

If Squishy  lived  in the U.S. and opted to purchase that road side assistance it could end up being one of the very expensive decisions she ever made. On the surface adding this to your insurance is a money saver. Insurance companies just charge about $10 a year for the add-on. Auto clubs like AAA can charge anywhere from $50-$100 a year.

While any financial adviser will tell you that living without insurance is very risky business, any one who has wanted to file a claim for a small item knows that insurance agencies keep track of  the number of claims you file in any given year. Their advice: If it's under $2,000, pay it out of your pocket.

Depending on the firm, it's three strikes and you are out. As Diana Ransom writes in this free area of the WSJ by calling for a tow or jump-start through your insurer, you run the risk of increasing your insurance premiums and possibly lowering your eligibility for future coverage.

"...many auto insurers -- including giants State Farm and Allstate -- typically treat these calls as claims, which the insurers may report to data-collection companies and which get used to determine premiums and decide whether or not to cover new applicants.

"We take all claims into account when we are trying to measure the cost of making a promise," says State Farm spokesman Dick Luedke. But he and an Allstate spokesman say their companies don't weigh roadside-assistance claims as heavily as accident claims.

How bad can it get? At The Newspaper.com, a website devoted to the "politics of driving" reports that insurance companies are raising the rates for people who lock their keys in their  cars or file claims under their road side assistance benefit.

Several insurance companies, for example, refused to cover Andrea Davis, 31, after she had two flat tires and locked her keys inside her 1999 Isuzu Rodeo. Davis learned her old insurance company, Geico, had reported her three claims to CLUE. Davis paid Geico $12 a year for roadside assistance, but the company never disclosed that using flat tire assistance would raise rates.

Chances are those companies checked out Ms.Davis in a little known database called  CLUE.

"The CLUE report and the insurance scoring system are tools insurers use to decide your risk profile, that is, how likely you are to file a claim against your policy. Insurers feed information about paid claims - perhaps even your inquiries about coverage that do not result in a claim - into a national database for use by insurers. Information included in the database, along with your insurance score, makes up your risk profile. Insurers use the profile to decide whether you get new insurance. At renewal time, your current insurer will probably review your claims history as well as your current insurance score to set your premiums - even to decide if you get to keep the insurance you have. When you shop for new insurance, the company may order a CLUE report. If information is inaccurate, you can be left without insurance while you work to correct the errors."

It's not just auto insurance of course. The same theory applies to homeowners insurance and of course if you pay that $5.95extra  each month to insure your mobile phone.

Beware. These policies really only allow one claim a year. Once you file two claims in a 12 month period, your insurance  on that phone number is suspended for 12 months.

What does that mean? Well, let's say you file two claims on a regular phone,  Your  insurance will be suspended for that phone number for 12 months. If you buy a new phone...let's say you want to upgrade to a smart-phone that costs $400, you will not be able to get insurance on that phone.

If you think you can add the insurance on the new  expensive model once your 12 months of suspension is lifted, think again.  You can only put insurance on a phone with 15 days of the sale. Gotcha.

Hat Tip to FAST COMPANY Blog"Guess Mom was right.Nothing is as good as it seems."

Famous last words: "We'll get back to you"

  In January 2005, Chloe took her teenage daughter to the eye department of a major department store to buy a new pair of glasses. There was no way that she could know that the transaction would  become her "own Kafka moment" and change forever how she feels about a respected department store, her insurance company, and consumer rights.

Since her health insurance picked up a portion of the cost of eyeglasses, Chloe innocently asked the clerk to call the insurance company to find out what amount they would cover. She waited while the clerk found out that information and then immediately paid the balance.

As Chloe says, " I have a superior credit rating. I pay my bills on time, I don't carry a credit on my credit cards. My husband and I are good money managers."

That's why she was surprised, when two or three months later she received a bill for the eyeglasses.And thus began the insanity of the bill that just wouldn't go away--even though Chloe had already paid for the glasses.

Being a rational human being, Chloe thought that a call to the vision department would clear up the confusion. It was not to be. " Every time I called the person answering the phone would say, " You have to talk to the manager."

Chloe called again. And again. And again. Finally after several weeks she managed to talk to the manager person to person.

It was not a great conversation. " She said she would have to do some research and she would get back to me."

When the manager finally did get back to her, she quoted a different payment arrangement than the insurance company had quoted on that day back in January. Chloe had now called the vision center about 10 times. Their final response, " You'll have to call the insurance company."

When Chloe called the insurance company they read to her directly from their CRM ( customer information service)  quoting what they ( the insurance company) had paid the vision center  and when they had paid the vision center.

Did I mention that Chloe is an executive who manages a multi million dollar budget and is used to working with invoices? Of course the numbers the insurance company quoted Chloe did not match the numbers that the vision center had on Chloe's bill.

Eventually, out of frustration, Chloe  decided it was time to write a letter to the store's customer service department.However, when she tried to look up that address, it was no where to be found. "I called the main number of the department store and no one there could give me that information either."

Chloe decided to send her letter to the president's office. In that letter explaining the entire situation. "I told them I was willing to pay any remaining balance but I needed to understand exactly what I owed and why I owed it."

Turns out that office couldn't help her but they gave her an address and phone number of the department to contact. Chloe once again sent the letter.

Once again she heard nothing. She called. Their response, " We never got the letter."

"No problem, " said Chloe, " I'll send it again.

"Before I got the letter in the mail, they called" said Chloe.  " They  said they had suddenly found my letter."
Not surprisingly, they said " We'll get back to you."

After several weeks, Chloe contacted them. She was delighted when they said, " We've got good news. We've got it resolved."

Chloe, relieved, said, " That's wonderful. I would like it in writing."

A week or so later Chloe gets the letter. It states, " Contact the Vision Center directly to resolve this issue."

It's now over a year. Chloe continues to get calls from the collection agency for $130.

Chloe says she's deflated. She wants to write the Better Business Bureau but says she doesn't have the energy.
Just to make matter worse, during the same time Chloe received a  different bill from her insurance company for $375 for surgery she did not have. After lots of calls back and forth, the insurance company said they had cleared the matter up and  she only owed a $10 co-pay.

A week or so ago, Chloe got a bill from her insurance company. For $375.
As to her daughter 's glasses. She lost them.

Note: Chloe is a pseudonym.

Image Credit: Flickr member Daily Pic