Why are insurance rates so high?

Greed is a leading candidate for the answer.

Insurance is supposed to cover unforeseen exposures, catastrophic events and to make us as whole as possible. It isn’t supposed to make us rich. More than a few people dealing with insurance companies act as if they are playing blackjack at a Las Vegas casino.

Back as a naive 19-year-old on the Western Placer Unified School District board in 1975, we had a claimed filed against us for $12,000 by a couple upset that their special-needs child did not receive a high school diploma. Staff documented that their son clearly didn’t even meet the lower bar as established at the time by state law for special-needs students.

So the parents filed a claim for duress based on mental anguish and suffering.

The  district’s insurance firm wanted us to accept the claim. The superintendent concurred.

I argued no. We hadn’t done anything wrong based on the facts the board was presented. I got three of the other four board members to agree. I believed it was the right thing for the district. I told you I was naive.

Two weeks later, we had a special meeting with a representative of the insurance firm.

He explained the real world to us. He said we were absolutely right, there was nothing we did wrong. If the case went to court there was little doubt in his firm’s mind that we’d prevail. The suit would probably cost the insurance company $15,000 to $20,000 to defend.

If we accepted the claim and agreed to pay the $12,000 the insurance company would cover almost the entire amount. They would not, however, renew district coverage when our contract expired. And because we rejected a claim that led to a lawsuit, he doubted any other insurance firm would extend the district coverage.

He explained the attorney for the couple had correctly determined the threshold of pain for an insurance company. Given standards of the day, the attorney would pocket $5,000 and the couple $7,000. The insurance company would be ahead of the game by at least $3,000 to $8,000 because they didn’t have to go to court.

When he was through we took another vote. I argued that if we didn’t reject the claim we’d only be encouraging more of the same in the future. No one voted with me.

Some 12 years later a dog ran in front of me as I was bicycling downhill at 40 mph in the foothills near Newcastle. I ended up on a backboard.

The dog’s owner was covered by Farmers Insurance. They picked up the cost of the ambulance, the emergency room visit, the bicycle repairs and even the cycling shorts and jersey that were ripped. I was happy. But then a representative of the insurance company called me. He wanted me to accept a $500 check for “other expenses.” I understood that I had up to a year to file reasonable claims related to injuries that I was treated for should they continue to be issues. I also understood that by taking the check and signing documents I would be giving up any right to seek other claims such as for loss of wages or anything else related to the accident. Since the accident happened on a Sunday and my employer had no problem with me using crutches and wearing shorts for several days, I didn’t lose any money.

I said I couldn’t accept the money with a clear conscience. Finally he asked if I had other things that were destroyed in the crash. I did. The bicycle helmet, gloves, and a ratty old sweatshirt. He said that sounded like $100 would cover that. I indicated they were all old and that I had another helmet that I bought before the crash. We talked, or should I say argued, for another five minutes as I believed they had no value until I relented. I took the $100 check and donated it to the Lincoln High Boosters.

Then 12 years ago, Cynthia and I were rear-ended on Christmas Eve in Stockton. We were stopped at a red light when a van slammed into us at 10 mph and pushed our S-10 Blazer into a Toyota in front of us. Thanks to a tire mounted in the back, the van sustained the most damaged, then the Blazer with minimal damage to the Toyota in front of us. Both Cynthia and I were hobbled over by the pain. Everyone else – including the occupants in the Toyota – were walking around normal. It took 15 minutes for the emergency crew to arrive. Just before they did, a passenger in the Toyota suddenly decided to lie down on the ground even though he had been walking around acting as if nothing happened.

Cynthia and I rode home with the tow truck driver. The guy in the Toyota went off in an ambulance.  

We were told later by an insurance agent that it wasn’t uncommon as the odds of someone getting a settlement beyond actual losses was greater if a person left the scene in an ambulance.

Too many people see insurance companies as a potential winning lottery ticket.

Lawyers often know it is a numbers games.

And their clients too often will see dollar signs beyond their actual losses



This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA.  He can be contacted at dwyatt@mantecabulletin.com or (209) 249-3519.