Insurance is a People Business

There’s a big rush today by venture capitalists and Silicon Valley techies to turn the purchase of insurance into an impersonal, technology driven business. There couldn’t be a worse outlook for consumers!

Technology is wonderful and a great way to speed up processing and offer 24/7 availability. It should never replace the professional guidance and expertise of agents, brokers and their staff. Using automation should improve the ability to quickly and effortlessly process work so that agency staff has more time to devote to working one-on-one with clients and prospects. It should not be used as a self-service method of purchasing insurance protection.

Insurance is a complicated item and that is because the policy is a legally binding contract, and knowledge of the contract and how it applies comes into play in every loss. Consumers are not in a position to understand all the nuances of coverage and how it will affect their protection. It is also misleading for anyone to imply that a consumer can make a well-educated decision about coverage even if they have spent time on the internet reading and learning. That is why at the minimum you have to take 90 hours of classroom training and pass a test to obtain an agent or broker license.

If going forward the business of selecting and purchasing coverage is left strictly up to consumers using technology, you can expect to have many unhappy and uncompensated individuals hiring legal representation and attempting to hold someone responsible for their failure to be properly covered.

Consumers experiencing a minor first-party property loss that doesn’t get fully paid will be annoyed and it will likely cause them an unreimbursed, but affordable, financial loss. Most consumers will chalk the experience up to the typical insurance company attempt to pay as little as possible.

However, if that same consumer isn’t properly covered for a serious loss related to their auto, home or business, you can expect to see lawyers involved and litigation ongoing. Some consumers won’t have the financial ability to fight. Some will fight and lose; while others may fight and ultimately win but suffer emotionally and financially during the process. The only ones winning will be the lawyers.

The major issue will be: How legally responsible are these technology driven, self-service Insurance companies for a consumer’s failure to purchase the correct coverage, as well as read and understand the policy they receive? I don’t think most consumers would want to rely on or wait for a protracted legal battle in order to be compensated.

The ironic thing is that the consumer whom these companies are most aggressively looking to attract are young, technology-savvy insurance buyers in many cases making their first purchase of insurance protection for a car, house or new business. They are the ones most in need of assistance, knowledge and recommendations about their protection. Services best provided by an independent agent or broker.

So what is the answer to the problem? I think it requires action on two fronts. First, as insurance professionals we need to make every effort to educate the public to the risks associated with buying coverage without getting professional advice. There is a real benefit to having a trusted advisor to help you decide the protection you need and to work with should you have a claim. Consumers should not expect companies they deal directly with to be looking out for their best interests or advising them of benefits available under their coverage unless they specifically ask for them.

Secondly, as an industry we need to be bringing to the attention of state insurance departments the issue of consumers using the websites of these self-service insurance providers to make uninformed decisions on insurance protection that could ultimately be devastating to themselves, their families or their businesses. It is their job to protect the public and they are fully aware of the complicated nature of insurance protection. We need to force them to take a serious look at the potential for real problems if average consumers are allowed to make decisions that could ultimately be devastating.

I am writing this article about the new websites that are cropping up, especially in the commercial lines area, that encourage consumers to select and buy their own coverage. That said, the problem is also inherent for any direct response carrier that isn’t providing consumers with solid explanations of coverage and encouraging them to buy the appropriate protection for their personal situation. I don’t believe many, if any, consumers are capable of making these decisions without advice from an engaged and trusted advisor.

I honestly believe that if consumers are adequately informed about all the potential dangers of acting as their own agent and buying their own coverage, they will want to have a knowledgeable and trusted advisor. Especially if that message not only comes from us but also from the insurance department that exists to protect them. It would seem like common sense that an informed and responsible consumer would want to protect themselves when buying insurance protection. They need to see agents as protecting their interests and not as an adversary or an unnecessary part of the purchasing equation.