Noble Public Adjusting Group really enjoys sharing information about insurance and how the industry works with our blog readers. Knowledge is power. That means the more you understand your home or commercial property insurance policy and the ins and outs of the insurance industry, the more proactive you can be if the time comes to file a claim. Understanding the language of insurance and the tricks insurance companies play with policyholders can make the difference between a denied or poorly paid insurance claim and getting your money promptly with a fair settlement. That is also what happens when you use a public adjuster to handle your claim. You get paid fast and fairly.
Today Noble wants to talk about what is called ‘playing the float,’ a term that describes one very good reason that insurance companies delay paying claims. As a homeowner or commercial property owner you pay insurance premiums to protect your property, and most policyholders pay these premiums on time. The insurance company doesn’t give you much choice in that matter, for if you are late on your payments your insurance policy will be canceled. But who holds insurance companies responsible when they delay paying claims? No one, and because of this, insurance companies are actually making money by delaying the payment of claims. They do this on purpose. It is called “playing the float.” Because they can hang on to that money for as long as they can get away with it, they are making money on your insurance settlement, while you wait to get your home or commercial property back to its pre-loss condition. Your hands are tied and meanwhile, your insurance company is banking your money, with interest.
One Very Good Reason Insurance Companies Delay Paying Claims
Warren Buffet wrote a great article in 2010 about how insurance companies profit by delaying payments of claims and the article is still very relevant today. We found the article on the NPR website, in a section called Planet Money. The article is titled, Warren Buffet Explains the Genius of the Float. Below, Noble Public Adjusting Group has taken the initiative of offering you a portion of the article for your reading convenience:
“Here’s Buffet on the float:
Insurers receive premiums upfront and pay claims later. … This collect-now, pay-later model leaves us holding large sums — money we call “float” — that will eventually go to others. Meanwhile, we get to invest this float for Berkshire’s benefit. …
If premiums exceed the total of expenses and eventual losses, we register an underwriting profit that adds to the investment income produced from the float. This combination allows us to enjoy the use of free money — and, better yet, get paid for holding it. Alas, the hope of this happy result attracts intense competition, so vigorous in most years as to cause the P/C industry as a whole to operate at a significant underwriting loss. This loss, in effect, is what the industry pays to hold its float. Usually this cost is fairly low, but in some catastrophe-ridden years the cost from underwriting losses more than eats up the income derived from use of float. …
Our float has grown from $16 million in 1967, when we entered the business, to $62 billion at the end of 2009. Moreover, we have now operated at an underwriting profit for seven consecutive years. I believe it likely that we will continue to underwrite profitably in most — though certainly not all — future years. If we do so, our float will be cost-free, much as if someone deposited $62 billion with us that we could invest for our own benefit without the payment of interest.
Let me emphasize again that cost-free float is not a result to be expected for the P/C industry as a whole: In most years, premiums have been inadequate to cover claims plus expenses. Consequently, the industry’s overall return on tangible equity has for many decades fallen far short of that achieved by the S&P 500. Outstanding economics exist at Berkshire only because we have some outstanding managers running some unusual businesses.”
Noble Public Adjusting Group wants you to know that when you hire us to file your home or commercial property insurance claim for damages, one thing you can count on is that we will not allow this practice by your insurance provider. By using a public adjuster to handle your claim, you just placed a fighter in your corner, one who will make sure your claim is paid promptly and fairly. There will be no floating your money by your insurance company.
Call us today if you would like to discuss how insurance companies delay claims by floating the money they owe you or for any other concern or question you have. We always love hearing from our blog readers. Noble’s home office is in Panama City Beach, but we can handle an insurance claim anywhere in the US.
Noble Public Adjusting Group
107 Amar Place Suite 103
Panama City Beach (West End), FL 32413