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I think fair and transparent business contracts are a consumer right. Insurance is statistical in nature, and contracts should be required to explicitly outlin

I think fair and transparent business contracts are a consumer right. Insurance is statistical in nature, and contracts should be required to explicitly outline the scope of coverage. If I’m paying $5/m for coverage of manufacturing issues with my Playstation, I expect any manufacturing issues to be covered. I would also expect an extremely unlucky customer to receive multiple device replacements without any change of premium - because the contract and price should reflect the expected failure rate of the device (plus overhead + profit). In that example, it should be illegal to boot an honest customer after the first failure… the only reason to do so would be because the insurance company set an artificially low rate that doesn’t reflect the ammortized rate of manufacturing issues. In other words: the business is breaching contract by charging me for a different service than I’m getting. Although, given the clear scope of coverage, proof of malfeasance is justification to both refuse payout and ban the customer. However, if I’m paying $5/m for unlimited coverage, I expect unlimited coverage. That rate is expected to cover idiots that keep their Playstation on a fireplace, and perfect people that never move the device from a cool location away from vibrations and interference. Again - if I get kicked after the first failure, that’s failse advertising. Of course there are people that will microwave their device for fun and demand a replacement - the rate should include those people, or the contract should not offer unlimited coverage. Businesses are free to not offer unprofitable coverage, but consumers have an economic right to demand that businesses honor contracts. I’d argue that consumers also have a right to accurate advertising - if the “unlimited coverage” plan has fine text that says “manufacturing issues only”, well, that’s not really above-board.

briandear 9y ago
Totally agree; the problem of insurance is one of contract law. Most people denied claims are denied legitimately based on the contract they signed. However, there is the perception that claims are denied unfairly because there is a disconnect between what you thought you signed with what you actually signed. I saw this every day when I was a catastrophe claims adjuster with Farmers Insurance during Hurricane Ike that demolished a good part of the Texas/Louisiana coast. I actually had a customer threaten to shoot me because I couldn’t write a check for a water damaged wood floor despite writing a big check to replace the roof. The actual source of the water damage wasn’t the roof, it was the floodwater. So while the walls from the roof downward were covered because that damage was from the seepage from the damaged roof, the floor damage was entirely from the flood. (It was a two story house so the water from the roof seeped through the walls from the attic and leached downward into the drywall, while the floor downstairs was covered in a pool of water from the floor. The point is the homeowner thought he was covered despite there being an extremely clear flood exclusion for that particular policy. I could have been really strict and only covered the walls down to the flood line, but since the walls were a total loss either way, I had the flexibility to cover the walls all the way to the floor. I saw this misunderstanding again and again when it came to roofs. A 20 year roof that is 10 years old is only covered at a fraction of replacement cost because it only had 10 years of value remaining. Those were uncomfortable situations for me however, the homeowner, when buying them policy could have bought a replacement cost add-on, but they wanted to save money so they got burned when they needed the coverage. Insurance agents are a HUGE part of the problem – is claims adjusters had to be the “bad guy” and break the news that their policy didn’t cover what they thought it did. I was the one getting harrassee when all I was doing was following the contract. I did my best to lean on the side of the homeowner, but all of my payouts had to be supported by detailed measurements, photographs and Xactimate estimates. A nasty business that was. I barely lasted a year before I burned out.
- s73ver 9y ago
  I think it is these "pick and choose" exclusions that have no actual sense to them. Of course a homeowner's insurance policy should cover flood damage to a floor. The floor is part of the home, isn't it? But no, the company decides to pick and choose, and they never really call attention to it. This is why the ACA came up with the "Essential Health Benefits" list. There were so many things that, common sense would tell you should be covered, but insurance companies would exclude for no viable reason (making more money or not having to pay out claims are not things I consider "viable reasons" in this context). You'd buy insurance, only to find out it wouldn't actually cover things that people would want to use it for.
  - Pyxl101 9y ago
    Insurance doesn't generally cover flood damage for structures in flood zones, or does so at a much higher price. The point of briandear's example was that wind had damaged the roof and walls, and wind storms were covered by the insurance; whereas flooding had damaged the floors, and flooding was not covered by the insurance. When you get insurance, it doesn't necessarily cover everything. You might have insurance that will pay for your home if it catches fire and is destroyed accidentally, but will not pay if a person deliberately commits arson. Insurance might pay of your home is destroyed by a storm, but not by a landslide, and so on. The main problem I heard with briandear's example is that people apparently didn't understand the coverage they had purchased. If I operated an insurance company, I would consider summarizing the policy that people were about to purchase with a simple form showing the most common hazards. Maybe even show them with simple glyphs depicting fire, floods, storms, etc., and indicating whether their plan covers that scenario or not. Ask them to sign or initial that form. It's not a legal form, but you'd present it to them and ask them to confirm they understand it along with the contract text version. Then, when an event happens and they're asking for an insurance payment, you show them the form that they had initialized, and explain how things were covered or not covered. I would also want to explain to people that multiple disasters can happen at once, and explain how the insurance company will reason about what's covered, based on the cause of each thing that was damaged or destroyed.
    - 9y ago
ahakki 9y ago
> Of course there are people that will microwave their device for fun and demand a replacement This is known as insurance fraud.
- losteric 9y ago
  The example offered "unlimited coverage" - I hoped to point out that making unrealistic offers is also a problem on the business side.

briandear 9y ago

Totally agree; the problem of insurance is one of contract law. Most people denied claims are denied legitimately based on the contract they signed. However, there is the perception that claims are denied unfairly because there is a disconnect between what you thought you signed with what you actually signed. I saw this every day when I was a catastrophe claims adjuster with Farmers Insurance during Hurricane Ike that demolished a good part of the Texas/Louisiana coast. I actually had a customer threaten to shoot me because I couldn’t write a check for a water damaged wood floor despite writing a big check to replace the roof. The actual source of the water damage wasn’t the roof, it was the floodwater. So while the walls from the roof downward were covered because that damage was from the seepage from the damaged roof, the floor damage was entirely from the flood. (It was a two story house so the water from the roof seeped through the walls from the attic and leached downward into the drywall, while the floor downstairs was covered in a pool of water from the floor. The point is the homeowner thought he was covered despite there being an extremely clear flood exclusion for that particular policy. I could have been really strict and only covered the walls down to the flood line, but since the walls were a total loss either way, I had the flexibility to cover the walls all the way to the floor. I saw this misunderstanding again and again when it came to roofs. A 20 year roof that is 10 years old is only covered at a fraction of replacement cost because it only had 10 years of value remaining. Those were uncomfortable situations for me however, the homeowner, when buying them policy could have bought a replacement cost add-on, but they wanted to save money so they got burned when they needed the coverage. Insurance agents are a HUGE part of the problem – is claims adjusters had to be the “bad guy” and break the news that their policy didn’t cover what they thought it did. I was the one getting harrassee when all I was doing was following the contract. I did my best to lean on the side of the homeowner, but all of my payouts had to be supported by detailed measurements, photographs and Xactimate estimates. A nasty business that was. I barely lasted a year before I burned out.

s73ver 9y ago
I think it is these "pick and choose" exclusions that have no actual sense to them. Of course a homeowner's insurance policy should cover flood damage to a floor. The floor is part of the home, isn't it? But no, the company decides to pick and choose, and they never really call attention to it. This is why the ACA came up with the "Essential Health Benefits" list. There were so many things that, common sense would tell you should be covered, but insurance companies would exclude for no viable reason (making more money or not having to pay out claims are not things I consider "viable reasons" in this context). You'd buy insurance, only to find out it wouldn't actually cover things that people would want to use it for.
- Pyxl101 9y ago
  Insurance doesn't generally cover flood damage for structures in flood zones, or does so at a much higher price. The point of briandear's example was that wind had damaged the roof and walls, and wind storms were covered by the insurance; whereas flooding had damaged the floors, and flooding was not covered by the insurance. When you get insurance, it doesn't necessarily cover everything. You might have insurance that will pay for your home if it catches fire and is destroyed accidentally, but will not pay if a person deliberately commits arson. Insurance might pay of your home is destroyed by a storm, but not by a landslide, and so on. The main problem I heard with briandear's example is that people apparently didn't understand the coverage they had purchased. If I operated an insurance company, I would consider summarizing the policy that people were about to purchase with a simple form showing the most common hazards. Maybe even show them with simple glyphs depicting fire, floods, storms, etc., and indicating whether their plan covers that scenario or not. Ask them to sign or initial that form. It's not a legal form, but you'd present it to them and ask them to confirm they understand it along with the contract text version. Then, when an event happens and they're asking for an insurance payment, you show them the form that they had initialized, and explain how things were covered or not covered. I would also want to explain to people that multiple disasters can happen at once, and explain how the insurance company will reason about what's covered, based on the cause of each thing that was damaged or destroyed.
  - 9y ago

ahakki 9y ago

> Of course there are people that will microwave their device for fun and demand a replacement This is known as insurance fraud.

losteric 9y ago
The example offered "unlimited coverage" - I hoped to point out that making unrealistic offers is also a problem on the business side.