How Insurance Companies Are Like Casinos
Here are ten ways that risk underwriting compares to the business plan of a Las Vegas casino—the insight may prove useful during a coverage dispute.
Most people don’t picture the excitement and glamour of Las Vegas casinos when they think of insurance companies. While Las Vegas casinos evoke images of the glitzy nightlife and high stakes action, insurance companies remind us of bureaucracy, red tape, and fine print. However, casinos and insurance companies have a lot in common.
Following are ten ways that insurance companies are like casinos, providing insight into the insurance industry that may prove invaluable during a coverage dispute.
- Risky Business. Insurance companies and casinos both trade in risk. Although one sells you a “policy” and the other offers you a “bet,” both operate under the same framework: You pay a small amount upfront. If the correct series of events transpires, they’ll pay you a larger amount. Whether or not that will happen is unknown at the time of the deal, and there is a risk that they will end up losing money on the transaction.
- Power of the Pen. Although insurance companies and casinos have money riding on uncertain events, they exercise an incredible amount of control that ensures they’ll come out ahead overall. A typical American roulette wheel has 38 numbers but, if you pick the right number, the house will pay you only $35 for every $1 you bet. That difference between the odds of winning and the payout creates the house edge ensuring that, over the long haul, the casino wins. Insurance companies operate the same way by evaluating the risks they insure and setting premiums high enough to make money in the long run.
- Bring a Translator. Premium. Vig. Binder. Box man. Adjuster. Teaser. Rider. Hard way. Umbrella. Double down. Tail. The gambling and the insurance worlds each have specific vocabulary, and it can be very intimidating for newcomers who don’t speak the language. In both cases, it helps to have an ally who knows the lingo, so you don’t mix up your E&O with your O/U.
- Bottomless Pit. Want to know what it’s like to litigate a case against an insurance company? Sit down at a blackjack table with $100 to spend. No matter how well you do, the other side has effectively endless resources to battle as long as you like.
- Commodities, Kind Of. For the most part, every casino on the strip offers the same collection of games, and insurance carriers offer the same collection of products, often with identical policy language. However, while both appear to offer commodities that are mostly the same throughout the market, the careful consumer doing their homework, can find small variations in the offerings that can add tremendous value.
- Service Is Key. Because the products offered in the market are generally interchangeable, insurance companies and casinos try to differentiate themselves through their service by promising a better “experience.” Casinos want to create excitement, and insurance companies try to convey safety. Either way, the goal is make you feel a certain way so that you’ll buy from them instead of their competitors.
- Big Fish, Small Pond. Dissatisfied and threatening to take your money elsewhere? Don’t expect your casino or insurance company to lose any sleep. Begrudged customers often make the mistake of thinking the insurance company will err on the side of paying a claim to keep the business. Unless you’re paying huge premiums, the average policyholder is as replaceable as a nickel slots player.
- Connections. Casino employees have broad discretion doling out comps. Insurance adjusters also exercise their judgment in deciding whether to pay claims. Sometimes, it’s not what you know, but who you know.
- Poor Sports. Not only do insurance companies and casinos make the rules to ensure they’ll win, but they can change the rules in their favor in the unlikely event they lose. If a new betting strategy is developed to beat the house, the casino can tweak the rules to eliminate the player advantage. Similarly, when an insurance company loses a case and pays a big claim, it can increase the premiums or change the policy language to prevent future losses. Losses are merely temporary.
- Experience Is Key. You wouldn’t expect a newbie gambler, wandering into a casino alone with a wallet full of money, to come out ahead. Similarly, anyone dealing with a disputed insurance claim should seek out professional advice. Navigating either world as a beginner can be daunting and costly.
Casinos and insurance companies are much more alike than people think. When dealing with either, it’s important to play your cards right and avoid going on tilt, or else you might just bust out.
Joseph G. Balice is a Partner at Brutzkus Gubner Rozansky Seror Weber. He is a member of the civil litigation team, and his insurance recovery practice focuses primarily on representing policyholders in coverage dispute with insurance companies.