Insurance companies giving away their profits? Wait, what??!!

I've been hearing a commercial by an insurance company who kept saying they would give away the unused premiums at the end of the year. While that sounds like a noble cause,  it does not seem to make much sense. What would they do in case of a serious catastrophe like a hurricane next year if they give away all their money this year?

As it turns out, there's a big difference between giving away the unused premiums and giving away the profits. Some insurance companies actually pay out more money than they collect in premiums. They make money by holding on to the premiums and using them for investments. Therefore giving away the unused premiums may mean they're giving away a very small amount of money or no money at all. If you hear the commercials I'm talking about, please pay close attention to determine whether they are giving away the premiums, which is not a big deal, or their profits, which is a huge deal. No one starts a business to give away their profits.

We Love Insurance Companies

As a lawyer who has no qualms about suing insurance companies to get them to pay, I really do believe that insurance companies get a lot of hate and hostility. They're like that horrible lover that you cannot seem to bring yourself to leave. No matter how badly you claim they treat you, you keep coming back. We complain about them, but as soon as something bad happens there we go running to them. We're not required to have an insurance policy; there is always the option to self-insure and pay your own money something goes wrong.

The thing is, because of all the bad press that insurance companies face, a lot of people do believe that insurance companies are piggie banks to be raided and used. And what's wrong with a little insurance fraud to the insurance companies if they have the money to pay? First of all, it's a crime. Second, we will drop your case if we sense that you are trying to use us to commit fraud.

In short, I completely understand why insurance companies would be stingy with their money. If they go around giving everyone maximum dollar, they would very unprofitable businesses.

We actually don't hate insurance companies. We actually admire their business model. Too bad it's not compatible with ours! We just want them pay you (and us) and we won't let them bully us.

Should a Company be Liable for What Its Employee Did? It May Depend on How Nice the Plaintiff Was.

Should plaintiffs' likeability or injury severity influence their chances of victory in lawsuits? The law says no, but any experienced trial lawyer will say otherwise. But what do the research data say?

I recently completed a study in which participants watched a video depicting a mock civil trial. Participants were 456 adults (80% White, 45.9% male, mean age = 38.09). In the trial, a customer sued a company for the actions of one of its employee (but the actual employee was not sued). Several different versions of the video were created by varying certain elements of the trial. For example, in some videos the plaintiff was nice while in other videos the plaintiff was rude. Also, in some videos the plaintiff suffered minor injuries while in other videos the injuries were severe. Other elements like the judge’s instructions, the lawyer’s statements, the employee’s actions, the company’s actions, etc. were the same. Each participant only saw ONE video.

Results:

The result indicated that participants who saw the likeable version of the plaintiff (customer) blamed the employee more than did the participants who saw the unlikeable version.

Likewise, participants who saw video that depicted a severe injury (permanent injury) assinged greater blame than did participants who saw a minor injury (temporary injury). Essentially, the employee was blamed more for causing a severe injury compared to causing a minor injury even though he did the exact same action in each scenario (it just happened that the customer was hurt more in one situation). This may seem commonsensical, but it’s important from a psychological and legal perspective (see “eggshell Plaintiff”).

But what does this have to do with the company? Well, it appears from a logistic regression analysis of the data that in some ways the more participants blamed the actual employee who did the act, the more they felt the company should be liable for the injuries.

Disclaimer: There are many differences between a real trial and the current study. Therefore, you should not rely on the results of this study in making decisions about your own case. But it never hurts to be nice!