Are Negligible Claims against the Logic of Auto Insurance?
Surely insurance is there for you to cover your losses in case of an accident. However, should you make a claim for every little incident because your policy covers it? Many people might think that they have paid for insurance so of course they should claim for any damages occur to their car. Again there is nothing wrong with that as long as you prepare yourself for an increase in your premium next year instead of possible decreases if you remained claim free.
Every year insurance companies have to deal with large number of negligible claims. You might say that if they are negligible what the problem is. Insurance companies need to investigate and deal with these claims. The administration cost of these claims often more than the claim itself. In other words, these small claims cost the insurance industry nearly twice as much. It may be a not much known aspect of claims but it is a very essential part of it.
Again you might think that why should you care how much it cost to insurance companies. You should care because it directly affects auto insurance premiums across the board and yours especially. A claim is an indication of your driver skills. No matter how small it is, it indicates that you are not a careful driver and you will pay for it when your renewal premium arrives. You should not be surprised if auto insurance premium goes up more than what you got out of your negligible claim.
The logic behind insurance is that the pool of money collected from insured individuals should be used for people who have suffered losses that they might not be able to cover on their own. Many people would not consider few hundred dollar losses as catastrophic and would not bother to ask for help to cover such loss. This is important part of the concept of insurance. It is there to give you a hand when you seriously suffer financial losses.
Naturally everyone would have their own opinion, but this article would at least explain why their premium keeps going up even though they only had a small claim. Insurance companies employ hundreds of smart people and they spend their time calculating the most profitable action for their employers. If they were not looking at the business in such a careful ways they will certainly make a big mess of their main functions, handling risk.
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