Why Do Insurance Companies Underestimate Third-Party Liability (OC) Compensation?

Despite the strict guidelines issued by the Polish Financial Supervision Authority (KNF) regarding claims handling in the insurance industry, the Financial Ombudsman receives complaints from injured customers every day. Drivers complain about insurance companies whose compensation payments are insufficient to cover their losses. What is even more surprising is that, despite third-party liability insurance premiums increasing significantly, the situation has still not improved. The answer to why this happens is quite simple: insurers seek to maximize their profits.
Insurance companies use various methods to reduce third-party liability compensation.

1. Underestimated cost of replacement parts.

When calculating repair costs, insurers often base their estimates on the prices of replacement parts rather than original parts, which are generally much more expensive. If the vehicle is still under warranty or the replaced parts were originally supplied by the manufacturer, the customer may be entitled to have original parts used for the repair.

2. Problems with reimbursement for a replacement vehicle.

Insurance companies are often reluctant to reimburse the cost of renting a replacement vehicle during the claims process. On the one hand, the rental rate is calculated using the lowest market rates, while on the other, the approved rental period may be too short to complete the repair of the damaged vehicle. Insurers may also refuse to reimburse replacement vehicle costs for private individuals, arguing that they can use public transportation. They claim that people who do not conduct business activities do not need a replacement vehicle.

3. Failure to reimburse vehicle towing costs.

There are cases where insurance companies refuse to pay compensation for vehicle towing, claiming that the service was too expensive and that the injured party did not choose a towing company based on the most competitive price. In other cases, insurers underestimate the cost of the service, claiming that official price lists of towing companies show significantly lower rates.

4. Underestimating mechanics’ labor costs.

Insurance companies may underestimate the labor costs charged by repair shops. Their calculations are often based on average labor rates, which can result in the compensation paid by the insurer being insufficient to cover the actual cost of repairing the vehicle.

5. Underestimating the market value of the damaged vehicle.

Insurers often fail to take factors such as low mileage or the installation of an LPG system into account. In such cases, it is worth identifying the factors that indicate a higher value of the vehicle but were not included in the claims adjuster’s calculation, and then seeking the amount that is actually due.

6. Deducting depreciation from the value of parts.

When a vehicle has been used for a longer period of time, insurance companies may claim that its parts were already worn. This often leads to a reduction in compensation due to so-called depreciation. However, the calculation should be based on the prices of new replacement parts.

7. Failure to reimburse the costs of hired specialists.

Insurance companies can save significant amounts of money by refusing to reimburse customers for the costs of services provided by hired experts, such as vehicle appraisers or lawyers, where reimbursement is justified.

As the examples above show, insurance companies use many different methods to keep post-accident compensation payments as low as possible, and these are only some of them. It is important to remember that appealing an insurer’s decision may be worthwhile, as compensation payments made in cash may sometimes be underestimated. The procedures involved in seeking higher compensation may seem complicated, take a long time and consume a great deal of valuable time and, in some cases, cause additional stress. Therefore, it may sometimes be worth seeking professional assistance from compensation firms that deal with motor vehicle claims on a daily basis and have extensive knowledge of civil law. A compensation law firm can handle all formalities involved in pursuing a third-party liability claim and represent the client before the insurance company or offer to purchase the claim.