When Apple programmer Kit Cutler's 2012 Ford Focus was slammed from
behind by a silver Lexus, the hit was so hard that it shoved his car
into the Honda Accord in front of him. Although no one was hurt in the
accident, the driver of the silver Lexus drove off without providing
insurance information to anyone. Cutler and the Accord's driver
exchanged insurance information, filed reports with the police and went
home. The accident was only slightly more confusing to Cutler than the
insurance claims process that came after.
That car insurance claims process baffles nearly everyone. "Most
people only file a claim every eight to 10 years," says Jeanne
Salvatore, vice president for public affairs and consumer spokesperson
for the Insurance Information Institute, an industry-supported, non-lobbying group dedicated to improving public understanding of insurance.
Cutler filed his claim by phone. "In that initial interview, the
agent told me very quickly that I wasn't at fault," he says. Then she
asked him questions about the accident and typed his answers into an
online form. Cutler checked and verified the information.
"They go through it all very quickly, so you have to pay attention,"
he says. "I hadn't been in an accident before, and I didn't know what
was going on."
This article explains what insurance companies are doing behind the
scenes in the wake of an automotive mishap or collision. It also
discusses what happens if you're hit by an uninsured or underinsured
driver.
Immediately After the Accident
If you're involved in an accident, "The first thing to do is let your
insurance company know you were in an accident and provide all the
specifics of it," Salvatore says. "From the second of the accident, keep
good records." Use your smartphone (or keep a notebook in your
glovebox) and write down the time, date, plate number, make and model of
their car, their registration information, license number, name,
insurance company and contact information.
If the police are on the scene, Salvatore says, take their names and
badge numbers. Get the names of any witnesses and note whether emergency
medical personnel were called. "Photos are helpful. Take pictures of
the car and the license plate," she says. "If the claim is
straightforward, you may not need any of it, but if a problem occurs,
you need all the information possible." Again, with the prevalence of
smartphones these days, this is all quite easy to do.
From filing the claim to resolving it, every insurance company's
methods are different. However, the essentials of the process are fairly
standard. You'll only see part of the process, though. All negotiations
between insurance companies about payments and reimbursements will be
carried on behind the scenes.
Filing Your Claim
As with Cutler's case, it's standard for your insurance carrier to call
soon after you report an accident. During that call, "We'll match the
person to their policy, determine what happened in the accident, find
out about any injuries, the extent of damage to both vehicles and get
some demographic information," says Mike Flato, a process business
leader for Progressive Insurance. "We'll make sure everyone is OK; if
not, what happened and then who'll handle the medical claims."
After a claim is filed, your insurance company assigns you a claims
adjustor, who is your contact from then on. Adjustors coordinate teams
that look at medical reports, investigate the accident, speak with
witnesses, view the scene, examine the vehicle damage, manage all the
repairs and any medical treatments, check all coverages (how much your
policy pays for medical injuries and property damages) and ultimately
determine fault.
"The claims process is the business of the insurance company," says
Salvatore. "Every situation is different, and the better organized you
are, the easier the claims process is."
While adjustors work, medical treatment and auto repairs start
immediately, with each insurance company covering its own driver's
injuries and property damages. This process of "making you whole" is
known as indemnification. Your insurance company indemnifies you, not
the other way around. Later, after the insurance companies assess fault,
they will negotiate to determine which one will reimburse the other for
claims paid.
Who's at Fault?
Fault assessment is not necessarily a simple matter. "Liability laws
don't govern how you assess fault," says John Murphy, service center
business leader for Progressive Insurance. "They dictate how much you
can collect and who is eligible." Therefore, fault determination is up
to the insurance companies.
"There may be an allocation of fault, such as 60/40," says Scott Spriggs, a member of the Insurance Council of Texas.
"In that case, payments may be apportioned by percent of fault." That
is, the insurance company of the driver who is 60 percent at fault pays
for 60 percent of the claims and the other company pays for the rest.
"Sometimes, if one party is allocated more than 50 percent of fault,
that driver's insurance company pays for everything," Spriggs says. "In
no-fault states, each driver's insurance company pays for its own
customer's claims."
If one driver is wholly at fault, it's much simpler. "In at-fault
states, at-fault drivers try to collect from their own insurance,
whereas the person who is not at fault collects from the at-fault
driver's insurance company," Salvatore says.
When an Uninsured or Underinsured Driver Hits You
It may come as a surprise, but the process doesn't change much when uninsured or underinsured drivers are involved.
"Each state has its own rules about what qualifies as uninsured and
underinsured," says Murphy. If an uninsured driver hits you, and you
suffer injuries, "your insurance company will pay you," he says.
However, you must have collision insurance or coverage for uninsured or
underinsured drivers in order for your carrier to pay for your car's
damages. After any payments to you, your carrier "will try to find the
uninsured driver and get reimbursement for its payments," he says.
Fortunately, Cutler got a photo of the Lexus' license from the
Accord's driver. The photo meant Cutler's insurance company could find
the hit-and-run driver and demand reimbursement for the $11,000 it paid
to repair Cutler's car. Because of the photo, Cutler says, his insurance
company waived his deductible.
Every state but New Hampshire and Virginia requires auto liability insurance.
New Hampshire requires that drivers set aside funds for accidents, but
Virginia doesn't, according to the Insurance Information Institute.
Despite this, the institute says your chances of encountering an
uninsured driver in the United States are about one in seven.
When a driver is underinsured, "your insurance company will work with
the other driver's company to cover your claim," Spriggs says. For
example, suppose the underinsured driver's policy covers up to $5,000 of
property damage, but your vehicle sustained $10,000 in damage. In that
case, the underinsured driver's insurance company will pay $5,000 and
your insurance company will pay the other $5,000. Your insurance company
will then go directly to the underinsured driver and seek reimbursement
for its payment to you.
Although claims adjustors determine fault, "subrogation units" use
those determinations to decide which insurance company pays and how much
it pays.
"Subrogation is the substitution of one creditor for another,"
Spriggs says. "If I am hit by someone else, my insurance company will
cover that damage." In other words, you substitute one creditor — your
insurance company — for another creditor (the other driver's insurance
company). That is subrogation. Then, of course, your insurance company
seeks reimbursement from the other insurance company or the driver.
In Cutler's case, neither he nor the Accord driver were at fault.
Therefore, each driver's insurance company paid its own customer's
claim. No subrogation was involved.
How Carriers Resolve Payment Disputes
When each driver's carrier completes its claim investigations, "one
insurance company will send a demand [for payment] to the other," Murphy
says. "That will be countered. The carriers will then work out
liability and who pays what. Most of the time, we make the appropriate
payments. The faster we can do that, the faster we can pay out."
If companies can't agree on payment, they can request judgment from Arbitration Forums, an industry-funded nonprofit set up to handle insurance carrier disputes.
"For arbitration, the two companies apply and present all their
information," Murphy says. "The arbitration panel makes a decision."
Those decisions are final and binding, and there is no appeal.
What You Need To Know
Even the most minor car accident can shake you up. But it's important to
know the steps to take so that everything will go smoothly in the
claims process.
If you need to file an auto insurance claim, know what kind of
coverage you have, be prepared with as much information about the
accident as possible, stay in touch with your claims adjustor and know
your state's laws regarding liability.
