Car insurance companies seem to use a lot of game theory, and "safe guards," to set up the process of assessment and pay-backs in cases of actual accidents such that they can prevent many kinds of fraud and protect their assets and revenue stream. Of course, the process is not optimized for delivering any kind of justice but only to ensure that "rational" decision makers make decisions that are least damaging to the revenue accrued to the insurance companies as insurance bets are "auctioned" by the various parties involved. (The cooperative insurance models of 600 years ago are certainly not operative in the 20th and 21st centuries.)
Last week, my C230 Kompressor was rear-ended by a 17-year-old who, apparently, is not listed as a named driver on his parents' insurance. While his parents' insurance adjuster is "investigating" whether he was driving his parents' Jeep Wrangler with their permission, I had to deal with my own lack of transportation, rent a car, find a suitable body shop, have my car towed to that body shop, call the two adjusters multiple times, follow up on the work of the assessor at the body shop, and do all this, despite the fact that I carry a "comprehensive" insurance on my car, and despite the fact that I've been rear-ended by a car carrying a 17 and a 16 year-old.
Finally, this afternoon I was told that the car is totaled. Tomorrow, I will have to call my adjuster again to discover what my "comprehensive" coverage, which I've maintained since I bought the car, really means. The assessor says if I decide to fix the car, there will be a deduction equal to salvage price of the car, which is an encouragement to not fixt the car although its value to me is higher than the "bluebook" value. (The assessor might have been unaware of my comprehensive coverage, which I myself discovered after having read the fine print in my car insurance policy.)
It is funny how the set up of these various transaction limits, force "rational" agents to make choices that are irrational to them, from a judicial point of view, but that which are the only choices left from an "economic" point of view, and which end up protecting the insurance companies' assets and revenue stream from gaming by potential fraud.
Insurance at its bottom is not about protection against unpleasant accidents. Instead, it is merely about creating a new economics at the time of accident which force certain choices on the parties.