Saving the Insurance Consumer
Insurance consumers desperately need to be saved… Saved by those of us who care about their engagement with our industry.
As the world has changed, more direct advertising to consumers is occurring in multiple media forums. Self-service engagement has been touted as having the advantage of an investment of “15 minutes or less.” Price is often portrayed as the ONLY important criterion in the insurance purchase decision. Many direct advertisements (on-line, television, and radio) tout the four pillars of easier, faster, cheaper better. These are all misleading to the consumer in one way or another. Examples of price driven purchasing:
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Progressive’s Flo “Name Your Price Tool” allows the consumer to pick the price they want to pay first and see the coverage after the fact. Moving along the price bar does not display changes in coverage until the price is selected by releasing the mouse thereby clearly making price the primary decision criterion.
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Online quoting systems gather basic information then simply produce a listing of insurance companies and premiums, the implication being that there is no difference between the policies and practices other than price. One such online vendor included a statement that appears to be a violation of most Unfair Trade Practices laws: “All auto insurance is exactly the same. It doesn’t matter what company you get it from. It’s just a question of finding the lowest rate. But the reason these companies spend so much on advertising is that there are millions of idiots in this country who actually believe that there is not a difference between different brands of auto insurance. These people have not yet figured out that they are being lied to, that all auto insurance is the same.”
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Insurer advertising often centers on catch-phrases that mislead consumers into believing that coverages are identical between products when the reality is, as explained below, coverage variations among policies are often significantly different. For example:
– “You get the SAME COVERAGE, often for less.”
– “SAME COVERAGE, better value.”
– “SAME COVERAGE, more savings.”
Consumers do not have an opportunity to see the coverage contract form of insurance until AFTER making a decision. Consumers should have the opportunity to see the actual contract of coverage for transfer of risk before the purchase decision is made.
The failure of these self-service models and misleading advertisements is to not provide the consumer adequate information to technically distinguish one product from another. Some non “ISO-standard” policies result in the consumer having inferior coverage compared to this standard only to be discovered at the time of a claim. Examples of those non-standard coverage forms are numerous. The following is a very short list of coverage variations among a number of auto policies in the marketplace:
Undisclosed household residents are excluded. This would include “boomerang” kids who return home but the parents fail to notify their insurer.
Mainstream personal auto policies cover most business use, but some policies exclude business use of nonowned autos or even business use of ANY auto. Employees at businesses often use their personal vehicles for trips to the post office or elsewhere.
Personal auto liability coverage is usually very broad, extending even to the rental of a U-Haul type truck, but some policies have weight limitations and would not cover such rentals.
Some policies exclude any type of delivery, from food to newspapers to cosmetics, whereas others only exclude such use if made available to the general public.
Most auto policies have very limited “racing” exclusions in order to protect the general public but many have absolute racing exclusions.
Some policies exclude or provide limited coverage for accidents involving criminal acts, which could include DUIs or speeding tickets, again being detrimental to the public.
Some advertisements promise consumers “a full car instead of ¾ of a car” without full disclosure of the terms of coverage. Another advertisement promises not to make an additional charge after an automobile accident. Any advertisement of specific coverage should clearly identify the specific terms and at least the average cost of the specific additional coverage.
State insurance department regulators need to review and revise their positions in this marketplace to protect the consumer against these disservices by taking the following constructive actions:
For All direct to consumer quotations the following disclaimer should be required:
All insurance carrier policies and coverage configurations are not the same. Care should be taken to be sure you understand the coverage that is being offered.
The insurance coverage contract will be the basis of any claim payment. All carriers doing business in the state are required to make their coverage forms available in their entirety on-line for a consumer to read and compare. We recommend that you compare policy language to determine accurate coverage comparisons.
Insurance coverage is an important tool to protect your personal assets. Selection of coverage by price alone is not recommended and you should consult with a licensed insurance professional before making a final coverage purchase decision.
Specific coverage benefits and terms are required to be disclosed when a specific coverage benefit is cited. Be sure to read those specific coverage terms to be sure you understand what you are purchasing.
Together, we need to collectively resolve to better serve the insurance consumer with accurate full-disclosure advertising minus the flashy sound-bites. We need to work with regulators to create a consumer-focused protective environment with minimum standards of coverage and required detailed disclosure in ads without misleading statements or promises. Failure to act now potentially will lead to an ultimate total collapse in faith in the industry to respond to claims consistent with logical consumer expectations.
Endorsed by the following thought leaders who believe it is time for change for the benefit of the insurance consumer: Chris Amhrein (Past Director of Education, IIABA), Bill Wilson (former Chair of the IIABA Virtual University); Dan Robinson, President and CE New York Central Mutual Insurance Company (Direct Written Premium 539.4 Million); Richard A. Poppa, former President and CEO of the Independent Insurance Agents and Brokers of New York; Steve Acunto, Publisher of “Insurance Advocate” magazine.
