The is no doubt that the Maryland car insurance industry as a whole is enormously profitable. Maryland personal injury attorneys devote a substantial portion of their resources to litigating accident claims an insurance company has denied. It makes some logical sense that any business that takes in more in revenue than it pays out in operating costs of overhead his going to be profitable. Reduced to its most basic form, the difference between revenue and overhead is the profit of the enterprise. Applied to the insurance industry, one would think that the difference between revenue- for an insurance company, premiums collected- and overhead – claims paid and other operating expenses- would be the effective profit for that organization. That model does not fully apply to the insurance industry, the analysts say. Insurance companies can still turn in gargantuan earnings while losing money on underwriting [i.e. paying more in claims and claims expenses than in insurance premiums collected]. Take State Farm as an example. They tell us in that in 2019 their automobile insurance division had earned premium of $41.5 billion, that they had claims and losses of $32.0 billion and expenses of $10.3 billion. Therefore, their underwriting loss was $764 million. If a ‘normal’ business model applied here, this company would go out of business. Indeed, why would State Farm continue to write car insurance polices that cost in almost a billion dollars a year?
Its what they do with the premiums. State Farm Mutual Automobile Insurance Company reported “investment gain and other income" of 3.4 billion dollars for 2019.
Taking that into account, the insurance giant had net income income, including the underwriting loss, of 2.3 billion dollars in 2019.1 They made two billion dollars while paying out almost a billion dollars more in automobile accident claims than they took in. The analysts point to these figures in support of the contention there is no direct correlation between a denied or underpaid claim and insurance company profitability. Does that mean that there are not profit motives for the insurance companies to pay as little as possible on each and every claim? Most assuredly not. Insurance companies deny thousands of Maryland automobile accident claims every years, and offer what injured individuals consider less than full fair value on thousands more. When a personal injury attorney challenges that conduct in court, Maryland insurance companies employ the most respected, capable and skilled attorneys around to defend their decisions in court.
I've spent the better part of a 25 year career battling insurance companies, to ensure fair compensation for those I represent. I'd be happy to take a complimentary look at your claim and offer my opinions and advice. Feel free to contact me today to schedule a discussion.
FN! Source: https://newsroom.statefarm.com/2019-state-farm-financial-results/