Insurance Denial: Who And Why?

People can be denied insurance for a variety of reasons. For example, in the context of car insurance, a person may be denied coverage if they have a history of accidents, speeding tickets, or DUIs. Similarly, a person's credit score, choice of vehicle, and location can also impact their ability to obtain car insurance. In the case of health insurance, a person may be denied coverage due to pre-existing conditions, the type of medical treatment sought, or if the services are deemed not medically necessary. Additionally, insurance companies may deny claims or coverage due to policy lapses, delayed filing, or disputes over liability. It is important to note that individuals have the right to appeal a claim denial and seek legal assistance if necessary.

Poor credit score

A poor credit score can be a significant factor in insurance denial or high insurance rates. Credit-based insurance scoring models, such as those created by LexisNexis and FICO, are used to determine the likelihood of an individual filing an insurance claim. These models consider factors such as payment history, outstanding debt, credit history length, pursuit of new credit, and credit mix. A low credit score can lead to higher insurance rates, with rates for drivers with poor credit being up to 61% higher than for those with good credit.

In the context of car insurance, a poor credit score can increase rates more than a recent DUI. For example, a single driver in Kansas with a good credit score and a flawless driving record may pay $233 more in annual premiums than a driver with an excellent credit score. Additionally, a poor credit score could add $1,301 to their premium on average. Similarly, in New York, a single driver with a good credit score and a clean driving record would pay $255 more in annual premiums than if they had an excellent credit score.

While insurance companies typically cannot use credit history as the sole reason for denying coverage, it is a significant factor in their decision-making process. A poor credit score indicates a higher risk for the insurer, leading to higher insurance rates or even denial of coverage. Improving one's credit score can be beneficial in obtaining better insurance rates and coverage.

Pre-existing conditions

A pre-existing condition is a health problem that a person has before the date that new health coverage starts. This could be a medical illness or injury, and it is usually chronic or long-term. Examples include cancer, diabetes, lupus, epilepsy, depression, asthma, and sleep apnea.

Before 2010, insurance companies could deny coverage or charge higher rates to people with pre-existing conditions. However, since the passing of the Affordable Care Act (ACA) in 2010, it has been illegal for health insurance companies to deny coverage or charge higher rates to people with pre-existing conditions. This means that insurance companies cannot refuse coverage, charge more, or limit benefits for pre-existing conditions.

Despite these protections, there are still some situations where people with pre-existing conditions may face challenges in obtaining insurance. For example, "grandfathered" health plans are not required to cover pre-existing conditions. Additionally, people with pre-existing conditions who have insurance plans that started before 2010 may be subject to higher rates or cancellation.

It is important for individuals with pre-existing conditions to be aware of their rights and the protections offered by the ACA when exploring insurance options. They should also consider their specific medical needs when choosing a plan to ensure they have the coverage they require.

Bad faith practices

Failing to Communicate

Insurance providers are required to communicate important information about your claim and their decisions in a timely manner. They may not ignore your inquiries or fail to communicate their conclusions.

Indefensible Denial

This occurs when a claim is denied with no obvious or justifiable reason. The company must have a legitimate and reasonable explanation for the denial.

Indefensible Delay

This happens when an insurance provider fails to confirm, deny, or pay claims within a reasonable amount of time. This can also occur if the provider fails to address a time-limit demand.

Unreasonable Demands

Insurance companies often request specific documentation to make a determination regarding a claim. However, if they demand irrelevant documents and other items to delay the process, it may be considered bad faith.

Lack of an Adequate Investigation

Insurance providers might use deceptive, illegal, or immoral tactics to investigate a claim. They may also deny claims without conducting any investigation at all.

Undervaluing Claims

Bad faith can occur if an insurance provider offers a significantly lower settlement than the actual value of the claim.

Unreasonable Denials of Coverage

Insurance companies may deny coverage unreasonably, such as refusing to pay a claim or conduct a proper investigation.

Failing to Act Within a Reasonable Time

This involves delays in investigating, confirming, or denying coverage, as well as payments or denials of claims.

Failing to Explain Denial Decisions

Insurance companies are expected to provide clear explanations for denial decisions, including the reasons for the denial and the relevant policy provisions.

Unreasonable and Purposeful Delays of Payments

Insurance companies may purposefully delay payments beyond what is reasonable, causing financial hardship for the claimant.

Failing to Provide Information About Policy Limits

Insurance providers are required to be transparent about policy limits and the extent of coverage.

Deviating from Industry Standards

Insurance companies should generally adhere to the standards and practices of the insurance industry. Deviating from these standards without valid reasons can be considered bad faith.

Failure to seek medical care

Failing to seek medical care when required can lead to insurance claims being denied. This is because insurance companies often require that claims are filed within a "reasonable" amount of time after an accident or incident. What is considered "reasonable" can vary from case to case and company to company, but it could be as little as a few days or a few weeks.

If a person fails to seek medical care and delays filing an insurance claim, the insurance company may deny the claim on the basis that it was not submitted within a reasonable timeframe. This is to prevent fraudulent or exaggerated claims and to ensure that claims are processed in a timely manner.

Additionally, failing to seek medical care can also impact the success of an insurance claim because it may be more difficult to establish a direct link between the accident and the injuries or damages being claimed. Insurance companies often require thorough investigations of claims, including medical evaluations and evidence of the extent of injuries. If a person waits too long to seek medical care, it may be harder to prove that the injuries or damages were a direct result of the accident.

Furthermore, failing to seek prompt medical care can also affect the perception of the severity of the injuries. Insurance companies may view delays in seeking treatment as an indication that the injuries were not as serious as claimed. This could impact the amount of compensation offered or approved by the insurance company.

In conclusion, failing to seek medical care in a timely manner can have negative consequences for insurance claims. It is important for individuals to understand their insurance policies and the requirements for filing claims, including any time constraints. Seeking prompt medical attention and gathering the necessary evidence to support a claim can help increase the chances of a successful insurance claim outcome.

High-risk status

Car Insurance

High-risk drivers are often charged higher premiums or denied coverage due to their increased likelihood of filing a claim. Factors that can contribute to a high-risk status for car insurance include:

• A history of traffic violations, such as speeding tickets or reckless driving convictions.
• Multiple at-fault accidents.
• Lapses in insurance coverage.
• Poor credit scores.
• Young or inexperienced drivers.
• Living in an area with a high crime rate or extreme weather conditions.
• Driving a high-performance car that is at a higher risk of being stolen.

Life Insurance

Life insurance companies also assess risk when determining eligibility and premiums. Factors that can lead to someone being considered high-risk for life insurance include:

• Age, with older individuals typically posing a higher risk.
• Medical history and current health conditions, such as heart disease, cancer, or smoking.
• High-risk occupations, such as commercial fishing, firefighting, or construction work.
• Dangerous hobbies, such as mountain climbing or scuba diving.
• Gender, with males typically considered higher risk due to lower life expectancy.

Health Insurance

Health insurance companies may deny claims or coverage based on certain criteria. Reasons for denial can include:

• Services deemed not medically necessary.
• Services no longer appropriate for the patient's health care setting or level of care.
• Ineligibility for the requested benefit under the health plan.
• Services considered experimental or investigational for the patient's condition.
• Late submission of the claim.

Strategies for High-Risk Individuals

Individuals who are considered high-risk can explore various strategies to obtain insurance coverage:

• Shopping around for insurance providers who specialize in high-risk coverage.
• Working with an independent agent or broker who understands the challenges of high-risk individuals.
• Combining smaller policies from different providers to achieve the desired level of coverage.
• Modifying their lifestyle or reducing risk factors, such as improving overall health or quitting smoking.
• Bundling insurance policies, such as car insurance with home or renters insurance, to obtain discounts.
• Improving their credit score, as it can impact insurance rates in some states.

Frequently asked questions