Why Your Insurance Company Isn’t Always Your Friend

Insurance and insurance companies in the United States today are a major topic of conversation. In healthcare, for example, you literally cannot escape the debate on whether the Affordable Care Act (Obamacare) should remain as is, be fixed, or be repealed and replaced. Millions of Americans could lose their coverage or simply won’t be able to afford it unless something is done about our healthcare system. That whole topic of insurance problems is very, very painful. But that isn’t exactly what this post is about.

Insurance can literally save you and your finances, but there are also serious insurance problems you may deal with along the way. Here's what can happen.

Today’s post is about how your insurance policies and the coverages you pay for are managed that can be even more painful than any illness, injury, or accident. That goes for health, auto, homeowners, and even your life insurance. Here’s why.

Sunshine, Lollipops and Rainbows

Unfortunately, I have had cause to use my health insurance all too frequently over the past 10 years. I have been insured ever since I was a child by many different companies and being in fairly good health most of the first 50+ years of my life, I never really worried too much about or gave a lot of thought to my health insurance.

That’s the rub though. Insurance is a must have and when you aren’t using it in any big way, the insurance companies are your very best friends. They in fact love you and your brother, your mother and your little pet doggie named Sunshine. As long as you pay your monthly premiums on time, the world is a really wonderful place for them and thus for you. And then…something happens.

Health Insurance Companies Can Sometimes Make You Sick

When you’re down and possibly out due to serious injury or illness, of course you are mighty thankful for having insurance coverage. You never know if or when you will need it. Getting sick or injured is not any fun and losing time from work, family, and life is probably the worst thing that can ever happen to you. But that doesn’t mean you won’t have insurance problems.

When I had my heart attack in 2012, I can testify that in addition to the physical, mental, and monetary stress on me personally, my family suffered as much or more with the thought that I might have died if not for the care I was able to get because I had the insurance coverage for everything including the aftercare.

But let’s be clear. Insurance companies are not your friends there just to help. They are a business and that business is to make money, lots of money.

The Insurance Business Model is a Different Animal

Insurance company business models are not the same as other businesses like retail, manufacturing, and food services where service to the consumer is their goal and it’s in their best interest to foster repeat business. You dine at a good restaurant even when it’s expensive if you get quality food and service and feel like they are treating you special and care about your experience, don’t you? And you return when you want that experience again, right? Not quite the same when it comes to insurance.

For one, insurance companies charge hefty premiums with the promises of coverages that are limited in financial scope and specific situations in the event of an accident or illness (which may or may not ever happen). They are banking on the fact that they will collect way more in premiums from their customers than they will ever have to pay out in claims.

Insurance companies can deny or delay those payouts to you and your doctors and hospitals. That can buy them time and time earns them interest on their money which of course puts money in their pockets. We aren’t talking small change here as insurance companies collected over $2.1 trillion dollars in 2015 in premiums!

Every delay means more money for them. Even at 2% interest a year that means billions of dollars to them.

The Insurance Warning Label

You are probably all too familiar with things like “that’s not covered under your policy” being spouted by an insurance company when you have had to file a claim or seek some kind of coverage to be taken care of.

Health insurance is a requirement (and I mean that literally under The Affordable Care Act while it still exists), but in the larger sense it’s really not a wise decision to go without it because it is really a very risky gamble to do so. That’s why most sensible people who can afford to have it, do. Without insurance you may still get care and you may physically recover in time, but if you need long term care you may not be able to get it because of your financial situation and you can even go bankrupt or die.

And It’s Not Just Health Insurance

All states require some sort of auto insurance. Auto insurance companies operate on the same business model as health insurance companies, but with one extra catch: you often have to deal with the “friendly auto insurance adjuster”.

Insurance adjusters may approach you as if they are your friends and on your side if you are involved in any accident, but trust me on this one – they’re not! When it comes to paying any claims, they are your well-trained adversaries whose sole job is to pay out as little as possible to protect their employer’s bottom line and that puts you on opposite side of the bargaining table. They may sound friendly, but the training they get is the reason that these companies make the money that they do and they have the advantage over you whether you know it or not. Don’t underestimate them.

Here’s a good tip for you if and when you are ever in a car accident although I do hope you will never need it. Don’t “chit chat” with your insurance adjuster. He can and will use any and all information against you when it comes to paying your claim or medical bills even when it seems like a friendly conversation. If in that conversation you mention that you work very hard at your job and are required to do heavy lifting for example, he may try and establish that your back injury in a car accident was partially due to your job and reduce the payout accordingly. It does sometimes happen that way. Be civil, but do not assume that apparent sympathy and concern from him or her for you is real. You have no obligation to make small talk with an insurance adjuster.

The Bills That Keep on Giving

One of the most aggravating and “sickening” feelings you can ever have is receiving a statement from a doctor or hospital from an illness or injury that they say was never paid by your insurance company as you thought. This is so much more frustrating when you get that statement months or even years after the incident. That has happened to me and I am betting to you as well.

To begin with, I can swear that those bills were paid and I have the proof of that somewhere around here. If I take a few hours and look through the 300 pages of bills, statements, and correspondence, I think I can find it, I hope. Keeping your documents organized is a big help in the process.

Then there’s the phone calls you have to make to try to clear up this problem, which by the way usually requires you to pay this amount yourself immediately upon receipt even when two years have gone by without a word about these “unpaid” matters. Be prepared to be placed on hold for a while and that’s a really good time to take a nap when doing so even if “your call is very important to them”! Hopefully you won’t get cut off or transferred 3 or 4 times before reaching someone that can help you!

The Bottom Line

Really, the insurance companies and the doctors and hospitals that are involved are hoping that you will become frustrated and tired of the matter and just resign yourself to paying the bill on your own. It’s not always that the claim should be paid by you, but trying to fix errors or miscommunications months and years after the fact is extremely painful if not impossible. Tip here: file all of your correspondence with your insurance company by date and incident and keep all of them where you can find them. Those bills might just never end.

If this sounds like me whining about how vulnerable we are when it comes to insurance coverages and the benefit and cost of them, it is. It’s like the old saying, “you can’t live with them and you can’t live without them!”

Have you experienced any insurance horror stories in your life? What have you done when faced with a problem in getting the coverage you paid for taken care of properly? Are health, auto, homeowners, and life insurance a problem or worth the pain it sometimes gives you for the peace of mind it promises to provide?

Image courtesy of Nick Youngson via CC BY-SA 3.0


  1. Emily @ JohnJaneDoe

    Good warnings, Gary. My dad is a civil litigator and has to deal with insurance companies that don’t want to pay all the time. He made sure that I knew that even if I was in a car accident (or another liability claim situation) and the insurance company hired a lawyer, to at least talk to another lawyer about the situation as there can easily be conflicts of interest.

    And I know of another situation where someone had 2 different health insurance policies, and the person got harassed for nonpayment while the companies argued about which one had to pay.

    Bottom line, insurance companies do what they have to do and nothing more. As a customer, you may have to kick up a fuss to get them to hold to their agreements.

  2. Great post! When a conversation turns to insurance, I always try to tell people to actually read their policies; they are full of “definitions” and “exclusions” that can result in denials of coverage when you need them most! One example is homeowners’ policies – a lot do not include flood protection or sinkhole coverage, which have to be purchased separately. I think it’s also critical to be aware of limits of coverage. A $100,000 liability limit on an auto policy can be a big gamble in the event of a serious accident.

    1. You’ve brought up excellent points, Miguel. So many people sign documents without reading them and make assumptions about them that it can wind up biting you. If you don’t understand the document (because of the legalese), ask a lot of questions and perhaps even seek professional help. It’s better to be safe than sorry.

  3. Sounds like a man writing a post from lots of experience and frustration.

    I just ran into a small issue where something wasn’t covered by my health insurance and out of pocket cost would be several hundred dollars. No one at the insurance company can give me a good explanation of why.

    On home owners and car insurance please read the fine print of the policies. We had a tree fall on our house during hurricane Irene, causing damage to our roof. Our policy stated it had to be a hurricane to be covered if it was a tropic storm would not be. I had no idea until after the fact. We had the policy changed.

    1. You’re absolutely right, Brian. I did have a very unpleasant experience with a $87,000 bill based on my hospitalization and care when I had my heart attack. Straightening that out literally took me over a year, and considering my condition, I’m surprised I’m still alive! Despite clearing it all up in the end, it definitely opened my eyes about what you should know about insurance coverage.

  4. There are few things I hate more than being the middle man between the doctor’s office and the insurance company. I sure wish they could just talk to each other and work out the bill and stop wasting my time! Thanks for the advice on avoiding small talk. I gab too much and I know I’d put my foot in my mouth.

  5. I’ve had a whole range of frustrating health insurance experiences. Exhibit A: Thanks to the whole pre-Obamacare pre-existing conditions situation, I had a baby while I was uninsured. The baby was great. The bills were not. Exhibit B: I had a CAT scan while in graduate school and thought my student insurance would cover all $2000 of that ten-minute experience. Nope. I ended up haggling with the insurance company and they eventually paid most of it, but it took months of discussion and persistence. Exhibit C: I recently went in for a regular physical using my new employer-sponsored insurance. Preventative care visits should be free, according to the handbook that I read in full, but they decided to categorize my appointment as a “New Patient Visit.” Because of that label, I ended up paying $25 out of pocket. The doctor’s office refused to change the category.

    I hate how complicated health insurance is in the U.S. and have resigned myself to the fact that almost every office visit and bill will require a phone call (or two, or three) to the insurance company to straighten things out.

  6. Actually, if you live in New Hampshire or Virginia, you don’t have to have auto insurance to drive a car – which is kind of terrifying. At least in New Hampshire, to qualify to not have auto insurance you have to provide proof that you are so financially wealthy that you could just weather any medical bills an accident would cause for you and another person. Virginia is just nuts.

    1. While it’s true that in the two states you mentioned, insurance is optional, the vast majority of drivers are insured in those states because if not, they will have to personally guarantee to pay for any accidents that are caused by them or their own personal car damages or medical bills. In Virginia, if you opt out of the insurance, you have to pay a $500 fee annually up front to drive legally without insurance. Personally, I believe it’s too risky but technically Mel, you are correct.

  7. Hey, Gary. I’ve been super fortunate in my life. I’ve only been in one car accident (thankfully it was minor) and I’ve never had a major illness. So I’ve never had to deal with insurance companies. I wish there was more transparency in healthcare insurance and healthcare. Say for example you need a knee replacement. Your healthcare insurer says it will pay $7,500 toward that surgery. You then go out and find doctors willing to do the surgery. Doctor A charges $10,000. Doctor B charges $12,000. Doctor C charges $15,000. If you go with Doctor A, you’ll need to kick in $2,500. For Doctor B, you’ll need to kick in $4,500. For Doctor C, $7,500. We’re making this way too complicated. Well, that’s my pathetic two cents anyway. Thank you, Gary, for a very illuminating and sobering post.

    1. Thanks, Mr. Groovy. The complications of making these kinds of choices that you describe is very frustrating. I also find it strange on prescription medicine, never knowing if my insurance is covering me with the very best deal. Recently I became aware of a case where having no insurance actually was the best deal when getting the prescription at the pharmacy because the pharmacy was charging more to insurance companies than to regular people. Very distressing.

  8. Louisa

    The best thing I learned recently is to put the phone on “speaker” when I am on hold. It might be obnoxious music, but I can at least put the phone down until the live voice returns.
    When we have family medical insurance documents to file, I consciously give thanks that I am a literate person of generally good health who is not in mourning for a relative who died of an illness–
    Wishing good health and safe driving to all!

  9. I read the title and thought “AMEN!”.

    Insurance companies aren’t our friends. I don’t like insurance companies – or insurance. Really.

    But it isn’t for me to like or dislike. It’s shifting risk over to someone else (the insurance company). It’s not smart to accept the full risk on yourself – even if you have millions of dollars. So even though I don’t like them, and they aren’t friends of mine, I understand the necessary business relationship we need to maintain with them… until some sort of better options come along. 🙂

    1. That is the dilemma, Brad. You not only want to share the risk, but you have to. The caution is that you have to really understand what they are covering, and you have to have the persistence when necessary to wage the battle when they’re not cooperating. If there were a better way, I’d be the first to sign up!

  10. Very nice and informative points Gary! You are so right about the difference in the insurance and other service based businesses, here they please customer to get their business but it is not in their interest to give us the best and promised services. Never thought from this angle before! It has made me more cautious about choosing my provider.

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