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“Beware of the Chipper!”

June 1, 2009
Chris Garlasco, Owner & Managing Partner - Founders Insurance Group

Chris Garlasco, Owner & Managing Partner - Founders Insurance Group

There is a common claims practice called “chipping” that is being utilized by several of the “brand name” insurance carriers that I find very disturbing and I think that you will too! I am proud of the work that most claims people do. The perception that companies are trying to rip off claimants on a regular basis is simply not true. However, the practice of “chipping,” often done by the very same carriers that advertise cheap auto insurance rates, help to feed that reputation.

Here’s deal, you are involved in an auto accident. The other driver is clearly at fault. The other driver may have even been given a ticket for causing the accident. The other driver’s insurance company pays the entire claim. Think again! Often times, the insurance carrier representing the other driver will admit liability, but then make some shaky claim that their client was only responsible for, lets say, 90% of the accident, leaving you to fend for the other 10%!

For the sake of discussion, lets say the damage was $10,000. The other insurance company has sent you a check for $9,000 (90%). You now must make a collision claim to your company for the rest, or pay it out of pocket. You will have to pay your deductable (for most people, $500) and then get a check from your own company for the other $500. Are with me so far? Your company can then go after the other driver’s insurance company in an effort to get the $1,000 back. If they do, you get your $500 returned to you. The other driver’s company, the “chipper,” is banking on the fact that it will be too expensive for your company to go after them for such a small amount. Often times, that’s a safe bet. To make matters even worse, if you don’t carry collision coverage, you are left to go after the other carrier on your own dime. Again, the offending insurance company is banking on the fact that it will not be worth your time and expense.

The end result is that even though you were not at fault, you now have a collision loss on your record, you are out your deductable and you have had a lot of aggravation in the process. If you have been following this blog, I have been consistently saying that all insurance companies are not created equal. A good independent agent is aware of these issues and can help guide you through these mine fields. Companies that practice “chipping” are putting millions in their pockets at your expense.

One final note, today’s blog entry focus’ on the Connecticut insurance environment, some states will be different. It should also be noted that I have sent a note regarding this practice to our legislative insurance committee chairperson and to date there has been no response.

Thanks for taking some time with me today!

Chris Garlasco

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One Comment leave one →
  1. June 1, 2009 1:45 pm

    Comment from Bill Wilson per his permission.

    Excellent article and a good example of how a good agent can help someone. Our Virtual University just had a question this past week where an insured with no physical damage coverage was hit by another driver. She’s waiting to hear something from the other company on a settlement. In the meantime, she has no way to get to work because she says she can’t afford a rental car (something the other carrier would be responsible for paying for). It demonstrates the value of physical damage coverage and how it prevents you from being at the mercy of the negligent party and their insurer.

    Bill Wilson, CPCU, ARM, AIM, AAM
    Associate VP, Education & Research
    Independent Insurance Agents & Brokers of America
    Director, Big “I” Virtual University

    http://www.iiaba.net/vu
    Bill.Wilson@iiaba.net

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