Insurance Policies – Too Clever by Half

I recently bought one of the new airline travel insurance policies. I’m on planes all the time visiting agencies and speaking across the country, so this new product appealed greatly to me. Many of my flights suffer lengthy delays and cancellations annually. The price ($25) was good, too, and being a quasi-insurance geek, I wanted to see how it worked. However, I’m only a quasi-insurance geek so I did not read the policy.

My flight was cancelled, I was rebooked on a later flight and so I filed a claim. The claim was denied in about 30 minutes. I can’t say enough for the fast claim response. My claim was denied because the flight was cancelled and not delayed. “Tomato”/”tomato.” I was going to get home late, whether on my original plane or a new plane, so it was all the same to me. However, the policy was specific and if I’d bothered to read the language, I would have known coverage was only for delayed flights, missed connections and lost baggage. This $25 tuition was a huge lesson for me. The typical consumer would likely be livid because they want the insurance to pay for getting home late regardless of whether the plane they were supposed to be on is late or if the airline put them on a different airplane that arrived home late.

The Details

People buy insurance to solve a problem. My problem was not the flight was delayed or cancelled but that I was getting home late. At that point, I could not care less about the details or the fine print.

Insureds could not care less about the fine details when they have purchased a policy only to learn when a claim occurs they have no coverage. Worse yet, when the agent hides behind the disclaimer, “You have a duty to read your policy and ask questions if you have concerns,” the insured rightly wonders what they paid the agent to do.

Consider another, even more extreme, example of an old accidental hand and foot injury policy I recently heard about. According to this particular policy, a person had to suffer a hand and a foot injury for coverage. The policy was not hand or foot.

When I bought the travel policy, I never thought about the important distinction between cancelled and delayed. My problem was getting to my destination late, not which plane delivered me late. The policy at time of purchase did not explicitly warn that cancellations were not covered but if it had, I would have been much more aware.

Insurance companies are too clever-by-half, seemingly offering coverage and then taking it away. This is the image problem. Another great example is when companies, particularly surplus lines companies, send a renewal and the forms have the same title and often even the same form number, but careful reading shows coverage has been stripped. (Which is why all surplus lines policies should be reviewed in the agency to verify all renewal form names, form numbers, and edition dates are the same as expiring.)

When people don’t know what they are purchasing, they will treat the purchase as a commodity. A commodity has no brand by definition. Then companies wonder why their retention is poor and price alone is so important.

Agent Value Proposition

Agents have a valuable client proposition and that is to be a professional. Step up to the plate and be a pro. Don’t hide behind the “duty to read” language that makes a professional look underhanded. A professional insurance agent has the brightest future because when they understand a risk, not only can they advise the exposures that need coverage, they can explain what the policy covers and the important silent points. The silent points are key because a non-expert is highly unlikely to ever pick up on the silent points. Duty to read won’t help them even if they read every word three times.

Computers today can do the job of the hacks and peddlers just fine. Those agents are mostly obsolete. They are dinosaurs. The environment has not quite extinguished them yet, but it is coming just as sure as the sun is rising. Whether technology gets them or companies eliminate them, it is just a matter of time. OCR (optical character recognition) technology is already being used to rate apples-to-apples and even compare coverages, and I have already seen companies cut agents’ commissions in half. The peddlers still write with these companies, which begs the question, can they survive on half? At some small level, amateur insurance agencies will likely always have a role, but it will be in one- and two-person shops.

The perspective that insurance is a commodity obviously also negatively affects agencies, especially when agencies hide behind the “duty to read” language. Commodities are, by definition, bought; quality is sold.

Professional insurance advice then, by definition, is sold. To avoid a poor image and commoditization, professional insurance services must be sold rather than relying heavily on marketing. The $6 billion in advertising being spent pretty much already makes this clear, at least to me. But I see a lot of agencies whose futures would be much brighter focusing on selling instead paying for marketing, either directly or indirectly. Selling insurance gives consumers the confidence a professional is looking after them.

Selling is personal. Marketing is not personal. Marketing by its nature is aimed at the masses (precise marketing programs are the exception, but these are rather rare in this industry).

Too Scared

Most producers and carriers will not get the point of this article. They are too scared or too clever-by-half, patting themselves on the back for making a sale that does not really solve the insured’s exposure. For anyone with much experience, you have likely had the same experience at some point or another in your career when reviewing an account written by certain competitors. It does not speak well of the industry or brand the industry well.

For the professionals, these are great times because while everyone else is running for cover, the best agents are standing proud as professionals. The best clients are recognizing these agencies. Without exception, my clients growing organically by double digits (after subtracting rate increases) are taking a stand and being justly rewarded. Their retention is 95 percent plus. They are attracting the best and brightest employees and young people that create a vitality lacking in so many agencies. They are attracting quality producers to their agency instead of searching fruitlessly as is so common.

Insurance is a fairly basic industry. Rocket science it is not. The best time to get back to selling professional services rather than being too clever-by-half is today. Are you up to it or are you running for cover?