Saturday, November 3, 2012

Do Insurance Companies Represent the Insured or Their Stockholders??

Over that last four years the one thing that I did not understand was why I felt my insurance company was not representing my interests?

Why were they not attempting to regain the lost easements?  And if this was not possible, why were they not even willing to discuss with me the loss?

Needless to say I have spent hundreds of hours reading, writing and trying to understand this.  And as far as I can tell the ultimate question is do insurance companies have a responsibility to the insured or to their stock holders?  Here is my understanding and questions.

First, my relationship with my insurance company is not an agency relationship but a contractual relationship. The way I understand this they have to act in good faith but it is not a fiduciary duty.  

When I began researching on the Fidelity site ( in 2009 I found this:

"The quality of Fidelity's customer service and the level of employee loyalty and commitment are enhanced by our employee stock ownership. Stock ownership serves as a motivational force for Fidelity employees who recognize the Company's success is dependent upon their efforts and contributions." 

So here is what I do not understand and it seems to me that it is a conflict of interest.  Per this statement the employees of Fidelity own the stock so therefore it is to the employee's benefit to increase the value of the company as it increases their own net worth.  So the income for the company comes from the premiums paid and I would assume also that this money is invested.  And then claims would be paid from these funds.  So wouldn't it be financially beneficial for the employees to not pay claims as it would increase the value of their stock?

It seems that  the basic equation would be:

Insurance premiums  -  Claims Paid  =  Profits

So if the claims are valued at $0 like mine then this would increase the profitability of the company which means that as Fidelity has employee stock ownership it would be beneficial to the employees to value claims at $0.  Right?????  Am I not understanding something here?  How are they defining "Company's success"???  The company's financial success?