Post Date 3.23.12 –  Question: Are auto insurance premiums buying the maximum possible protection for PA and NJ Drivers, or is the car insurance system in these states full of costly coverage sharing leaks?  The underwriting losses in both Pennsylvania and New Jersey is running 75%. This means for every $100.00 an auto insurance company earns in monthly payment, they pay out $75.00 to repair automobiles and medical claims costs. This leaves 25% to pay sales expenses, business overhead and Auto Insurance Company underwriting profit.

There’s another side of the car insurance claims payment coin. The money paid in actual car insurance claims is split between the claimant, his or her lawyer, a doctor, the hospital and an auto body repair shop. Sadly; financial leaks do occur. Because of the many people involved, the overcharging of invoices and padding of bills is very difficult to isolate. Studies have shown, 20 cents of every claims dollar goes toward the payment of lawyers.  This is an amazing amount. The American Trial lawyers Association feels the cost is more like 11 cents.  If we even accept the lower figure, tens of millions of dollars a year normally earmarked for accident victims and their families is paid to their legal counsel.

A recent study has revealed only 14% of those involved in an auto accident seek the advice and retain legal counsel. Out of that 14%, only 5% file a law suit and less than 1% of those cases ever make it to trial.  Although it is generally known those at fault accident victims whom retain legal counsel do secure a larger settlement – they are only larger to offset the 25% to 50% contingency fee.  In reality, the claimant fares no better than if he or she had no lawyer.

-Mike 

Michael E. Dortch
President &  Managing Agent
InsureDirect.com
Corporate Home Office
618 South Broad Street
Lansdale, Pennsylvania  19446
(800) 807-0762  ext. 602