For most consumers, the big problem with insurance companies is that they never seem to want to pay claims – even the most obviously valid ones. So – why is that, and how can it be changed?
Why Don’t Insurance Companies Pay Claims?
Insurers are so reluctant to pay because once they have your premium money in hand, they want to keep it. After you pay your premiums, your insurance company is investing your hard-earned cash on their own behalf, so they can make more profits and pay more dividends to their corporate shareholders.
Basically, insurance companies have a dual responsibility to 1) you (the policyholders) and 2) shareholders/investors of the company. This causes a major conflict of interest – on the one hand, the company needs to pay dividends to the shareholders when there is profit – after all, the shareholders are the owners and investors of the company and they expect a profit. On the other hand, the company is contractually required to pay you for your valid insurance claim.
Are you following me? Okay, then let’s throw in a third factor – if the company makes more profit, they can also increase the CEOs salaries (and executives are often shareholders, too).
Who do you think wins in this conflicted scenario? Probably not you – the policyholder – because you are not as financially powerful as the CEOs and the shareholders. Maybe there could be more balance if the law was strongly protective of you and your rights, but unfortunately in the United States, it is not.
How Can it Be Different? It Wasn’t Always This Way!
Insurance doesn’t have to be this way. In fact, historically, insurance started as a “mutual” fund held ONLY to help those people who contributed money to it. So, if you contribute money to the insurance fund in your community, you will be fully paid when you have a claim. If the community mutual fund had money left over at the end of the year, they would GIVE IT BACK TO YOU and the other contributors. Sounds pretty nice, right? These kinds of mutuals still exist, but they are very rare in the U.S. Most of the American companies which advertise as “mutuals” are not truly mutuals at all (they were at one point in history but they’ve changed so much that they now have that conflict of interest we talked about above, and definitely don’t issue any money back to the policyholders).
New, Beautiful Idea
So what’s a policyholder to do? Here’s an interesting new concept – the company LEMONADE has erased the troubling insurance company conflict of interest by promising to take the extra premium money that was not spent on claims and pay it to CHARITIES. Sure, you may prefer they give the extra back to you – that’s understandable. But what’s very cool about the extra money going to charities (except, duh, helping humanity!) is that this means LEMONADE has no interest in trying to deny your valid claims. There are no policyholders and executives waiting for their extra profits, because all profit goes to the charities.
So – you can pay your insurance premiums, not stress about your claim being paid when that day comes, and know that at the same you are helping great charity programs that support education, ending hunger, and building homes for the homeless – to name a few. You even get to choose your own charity! What a beautiful idea. I hope LEMONADE’s ground-breaking, positive social model disrupts the entire industry.