When Insurance Covers Routine Expenses....

When insurance covers routine expenses, perverse incentives often follow.  Here is an example I found today shopping for a company to replace my car's windshield -- This sure looks to be an absolutely blatant kickback (image from a glass company website here).


All the pitches on my Google search are like this.  Here is another one:


But here is the winner, at least as far as I got through the google search:


Don't you have to wonder about a $1,000 rebate on a procedure that retails for perhaps $250?

I am not a lawyer, nor do I play one on the Internet, but it certainly appears that the glass companies are charging the insurance companies for more than the glass replacement would normally go for in a competitive marketplace, and then splitting the extra money defrauded from the insurance company with the consumer.   Another way of putting it is that in selecting a glass company for an insurance-covered repair, the consumer is acting as an agent for the insurance company, and as such an agent the consumer is taking a monetary inducement from a particular vendor to throw business to that vendor.

Arizona has explicit no-fault legislation banning insurance companies from raising insurance rates due to broken windshields.  I wonder what there is to stop someone, then, from heaving a rock at his/her windshield every other week?  Further, I wonder what stops such offers, which look like blatant kickbacks to me, from being either illegal or prosecuted?  I can only guess that in the weird interest-group-politics that substitute nowadays for ethics that its OK to commit fraud if the little guy is the beneficiary and unloved insurance companies are the victim.


  1. rob sama:

    I dare you to try it. Go buy a clunker (if you can find one), insure it and throw a rock through the windshield once a week. Report back on what happens.

  2. Michael:

    I've wondered about "legal" fraud. 10 years ago I returned to Cincinnati. I tried out three banks. Never having found one with the services I liked, I went with USAA in Texas. A few years later, I started getting collection calls on the accounts I had with these Ohio banks. It turns out the banks took my closed accounts, reopened them, generated an inactivity fee causing overdraft fees. They let the accounts compound interest for a few years and sell them off to collection agencies as bad debt.

    I talked with some locally owned banks and apparently this type of activity is legal in Ohio. It's a hassle since the only solution I've found is to file with a small claims court and get a default judgment. The banks are then willing to reign in the collection agencies to avoid a lien on their business.

    As for the windshield glass, in Ohio the insurance company tells you where to go. I guess the insurance companies have negotiated reimburse rates with service providers.

  3. Margaret:

    In our neighborhood after a big hail storm, a roofing company was offering to give homeowners $500 back if the owner selected that company. Seems like this should be illegal too, as that would mean writing the bid for $500 more. Maybe I don't understand the process, but it sounded wrong to me.

  4. Chidemont:

    OK to commit fraud if the little guy is the beneficiary and unloved insurance companies are the victim.

    The unloved insurance companies simply raise their premiums, stick it to the little guy, and become more unloved. Who would have thought that Big Windshield has more lobbying power than the state's auto insurance industry?

  5. dr kill:

    And who can forget the catheter and diabetes charlatans, the fucking scooter store and my new fave, the diabetic cookbooks.

    All people who will helpfully bill Medicare for you. Warms my fucking cold cynical heart.

    Thinking about all the people who depend on Gov regulations for employment makes me want to cry. it is really difficult to find anyone who is not affected in some way. Free markets do not mean what people think they mean. Look at all the huge corps lining up to jump in the sack with our current fed administration.

    Am I alone in opposing this?

  6. sabril:

    dr kill, it's amazing how wealthy the US is given how few people actually do productive work.

  7. Craig:

    I hold out for a box of steaks when I get my windshield replaced, although didn't a law (either federal or in some state(s)) make that illegal recently?

  8. Michael:

    Margaret roof work costs more than $500. The roofing company could have cut a deal with a shingle supplier for $5 off per pack or found day works for $80 rather than $100. The company could also be cutting its profits to gain market share in a new area. The deal doesn't sound fishy to me.

  9. MikeinAppalachia:

    Many, if not most, of those offering "$500" in gas or groceries are now,or soon to be out-of-business if not in court facing fraud charges. They typically have an initial fee of (say) $35-$50, then one is to submit receipts for purchases that will be refunded over many months by either a percentage of your purchases or whatever. When their pyramid crashes, they disappear. The Glass, Auto Sales, Roofing, whatever Co. received a small fee and a share of the initial fee for every one they introduced to the procedure.

  10. bobby b:

    Here's the skinny: Legislator - usually a strangely wealthy one - pushes through a bill that says that, if an insurer doesn't immediately and promptly pay a claim on a windshield, the insurer has acted in "bad faith" (which stems from the age-old concept that parties to a contract always take on an implied covenant - a promise - of good faith and fair dealing) and so the insurer has to pay the bill, plus any and all attorneys fees that one had to spend to get that bill paid.

    So, the smarmy types who do windshields go out and find a smarmy type doing lawyering work, and they become best friends. Windshield vermin gathers in customers ("it's free! We'll just collect from your insurer like we're supposed to!"), replaces the $200 windshield, and sends Ace Insurance a bill for $2600.00.

    Claim Guy gets the bill, says "oh, molest ME!", swears he'll see windshield vermin in hell before he'll pay such a claim, and about one day after he gets the bill, Smarmy Windshield Lawyer Vermin drops a Summons and Complaint on him, suing Ace for refusing to pay, along with the hold-up letter that says "We're suing you! You can fight us, and maybe win, and in the process you'll pay your lawyers hundreds of thousands of dollars in fees that you won't get back from us - or just send us a check today for $25,000.00 and we'll forget the whole thing!"

    Just remember - if you live in a state where you see steaks for windshield work, or cash, or trips, chances are you have a legislator taking big bribes to set it all up, and you can thank her or him when you realize that your auto insurance just doubled again.

  11. Greg:

    I replaced my windshield about ten years ago, in Connecticut, and paid for it out of pocket, because it was cheaper than going through the insurance company. In other words, the bill for the insurance company was higher. Perhaps there's some sense to that, since a claim involves having someone do extra work to process it. That's exactly why covering routine medical checkups is stupid. (It may make sense as a selling point for an insurance policy, or to reap the benefits that may exist from encouraging people to seek routine care. But it doesn't make financial sense.)

    A requirement that health care providers charge each purchaser the same amount, except for legitimate savings from economies of scale, would help stop cost shifting and make individual insurance and paying out of pocket less expensive. It's not a libertarian suggestion, but I really want to compel those European nations to pay the same for American drugs. :)

  12. Dennis Elias:

    Here in AZ the desert environment and massive building projects create geologic projectiles everywhere. Many cars sport star bursts... and with the high summer heat, exploding cracked windshields are not uncommon. I've replaced at least three windshields in the last couple years... the repairs are part of my comprehensive coverage. The glass company and the insurance company handle everything. I get no check. I like the law and no one in their right mind would throw a rock throw their own windshields to defraud an insurance company as you can't get a direct cash payout... and more importantly driving without a windshield here is like facing the exhaust from a jet engine.

  13. Steven:

    Actually, the insurance companies can and do raise rates for windshield claims when the consumer is shopping around for new carriers. So if you have no comprehensive losses versus 3 losses - all of which happen to be windshield claims, the rate are usually higher.

  14. Rick:

    Last time my windshield was replaced (here in AZ) I went with a company that offered 50 free dinners at a local chain rest. Turned out was coupons, each good for a specific week in the future. Could not be used earlier or later than that specific week. Good for entree only, not drink, dessert, tax, tip, etc. Obviously they bought these from the rest. at a discount, on the assumption that the majority of the coupons would not be used.

  15. Arizona Insurance:

    It is very interesting how they can flatly offer $500 in grocery money on a job they may get paid $250 for. Bizarre industry for sure.