Editors' Cuts

Industry's Image Fix Must Come From the Top

Pat Speer
Insurance Experts' Forum, March 7, 2013

The notion that insurance (the industry and its products) is sorely misunderstood is an important one, and proving so with the number of varied responses my original post on the subject has garnered—especially among INN's Twitter followers.

This started with a Knowledge at Wharton blog that featured comments about a new book titled, "Insurance and Behavioral Economics: Improving Decisions in the Most Misunderstood Industry," wherein Wharton Professors Howard Kunreuther and Mark Pauly join Urban Institute researcher Stacey McMorrow in a study of consumers, insurance leaders and policymakers. Their conclusion was that all three groups illustrate an “overall failure to grasp how insurance can fulfill the roles it is designed to play: reducing future losses and financially protecting those at risk.”

It might be a good time to clarify my original point: the fact that consumers and regulators don’t understand how insurance works, or the value it’s designed to provide (regardless whether as an investment vehicle or a medium that provides financial coverage for loss) is a given.

We know that 99 percent of personal lines consumers don’t understand the coverage (and coverage limits) they are buying. Who reads the fine print—declarations, definitions, exclusions, conditions, endorsements, riders, etc. Further, insurers (and their agents) admit (via several LinkedIn postings) that the amount of coverage recommended to consumers often does not hit its mark. It closes the sale, but it’s often inadequate, the low-cost alternative to what’s truly required for financial security in the case of total loss. This is a much deeper problem because it ignores the underwriting discipline suggested by carriers competing for that agent’s business.

We also know, based on the lobbying efforts that work and don’t work in Washington, that legislators will continue to question and try to control what they can based on their constituents’ demands, right?

But what role do insurance leaders (executive decision-makers) play in upholding misperceptions about the insurance business environment? My assumption was that maybe, because insurance is such a vital part of our economy, and a law-enforced "must have" for most American households, execs don’t need to worry about it—or they may perhaps even ignore what’s necessary via messaging and education to fix what’s wrong.

So maybe I shouldn’t make too many assumptions. After reading the number of social media responses both on LinkedIn and Twitter, it’s clear that there is a groundswell of acknowledgement and frustration over the way the business of insurance is conducted. From criticisms about agents who sell “gadget” covers instead of focusing on basic needs, to calls for raising the bar on licensing and continuing education requirements, the bulk of responses from rank and file to C-level execs puts the onus on insurance leaders to improve the industry’s image. Isn’t that where it truly belongs?

Pat Speer is an editorial consultant for Insurance Networking News.

Readers are encouraged to respond to Pat by using the “Add Your Comments” box below. Shealso can be reached at patricia.speer@sourcemedia.com.

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments...

Already Registered?

If you have already registered to Insurance Networking News, please use the form below to login. When completed you will immeditely be directed to post a comment.

Forgot your password?

Not Registered?

You must be registered to post a comment. Click here to register.

Blog Archive

3 Reasons DevOps Matters

Every insurer needs to compete on products and information turned around in light-speed fashion.

Coordinate Coverages to Manage Social Media Exposures

The bottom line is that no one policy will cover all the exposures in the social media realm.

The Internet of Things: Helping Insurers Make Better-Informed Decisions about Risk

The IoT is a major game changer for the insurance industry, and will likely affect every part of the insurance value chain. After all, insurance is data-driven, and that’s exactly what the IoT can deliver—relevant, actionable, real-time data that can provide an accurate picture of what is being—or may be—insured.

Software-Defined Everything

What does it take to virtualize all the key components in your data center?

On Thanking the Regulator … Really

The Financial Conduct Authority is demanding higher standards of consumer protection from insurers, which could lead to greater customer engagement and understanding.

Competing with the Coasts for Tech Talent

Are heartland-based insurers at a recruiting disadvantage for tech skills?