Industry's Image Fix Must Come From the Top
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.
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