Public’s Perception of Insurance Is Reality – Accept Reality

Perception is reality. The general public’s perception of reality relative to insurance is that personal insurance, especially auto, is a commodity.

Their perception ranges from it being a government conspiracy designed to enrich insurance companies because it is mandatory to it being a necessary but unpleasant expenditure. (Interestingly enough, this perception does not seem to apply to Obamacare where arguably government and some insurers did build the Affordable Care Act through mandatory purchase, which just goes to show – perception may be reality but reality can be pure fiction.) One of the scariest versions is that insurance should cover whatever anyone wants it to cover. Another scary version is that companies, small and large, have unlimited insurance coverage that covers everything.

This last version was made crystal clear in a letter to the editor I read in Texas Monthly regarding the Blue Bell listeria recall and litigation. The writer stated that Blue Bell “obviously” had plenty of insurance to cover their losses and therefore, the company, its owners and presumably, its employees would not suffer any harm while innocent people that liked their ice cream would pay through illness and death.

I don’t know much about that claim except this: I have no idea how that reader would know that Blue Bell “obviously” had plenty of insurance. I doubt he even has any clue that Blue Bell would have needed more than one kind of policy that had plenty high limits. My pure guess is that Blue Bell wishes with all their heart they had purchased more or better insurance and that they do not have nearly enough coverage given the scale of their problems.

What they probably need more than insurance is a lot of fresh capital at this point (which they may have obtained by the time this is published).

I write this story in this fashion because many people within the industry reading this will agree with me that the letter to the editor writer is either ignorant or he’s disclosing information that he has no right to disclose. Some readers will be going so far as to begin diagraming the kind of coverage Blue Bell likely needed.

For insurance nerds, this is the common reaction but it is a reaction that exacerbates the bigger problem. This reaction is small. It is indicative of the Mutual Admiration Club (MAC) of insurance people who congratulate themselves on knowing more than the public and thinking the public has the wrong idea about insurance.

Perception Is Reality

Insurance coverage is not easy to understand so it is prone to the public wanting to commoditize it so they don’t have to think about the details. Heck, the reality is a large proportion of agents do the same thing. They commoditize it too because they do not adequately understand coverages. Many agents’ lack of knowledge has materially exacerbated the commoditization of insurance. Commoditization is even more dangerous going forward because it is in some regulators’ and politicians’ favor to commoditize insurance too.

The solution then is to recognize the public’s perspective of reality is reality. Accept reality. This advice is especially applicable to insurance associations. This first step is going to be extremely difficult for many in the industry to take but the first step is the essential step. Reality must be accepted before the tide can be turned and it needs to be turned to fend off regulation and new money that will make the situation worse.

The second step is to resign your MAC membership. MAC membership is a defensive measure. People go this route because they don’t know how to deal with the public’s perception of insurance, which is only getting worse given the advertising of a few companies. We have to deal with reality. Proof exists that individual agents can make a difference and that difference actually results in more sales!

It means going back to the basics. It means meeting with insureds on a regular basis. It means giving individual advice. Simple items such as driving advice for teenagers actually work to increase sales, increase trust, and helps insureds gain in understanding how insurance works and how insurance is not a commodity. Maybe more importantly, it helps insureds understand the value of an agent.

Another step that might help people understand the value of an agent more than anything else is taking the bold action of actually announcing that agents are an advocate for the client. As long as insureds, competitors, financiers and especially tech savvy Millennials see agents as nothing more than a middle man making money for nothing (reality versus perception do not have to be the same and perception always wins), agents will be endangered. In effect, what has to happen is a true brand must be created to show that agents are not just middle men.

Branding

Different branding attempts have been made but everyone always hides behind errors and omissions (E&O) exposures to dilute the message so far that only cryptologists can discern the points made. A lot of consultants make a lot of money building brands, creating logos, choosing colors, ad nauseam. Effective branding is fairly simple. The details may be complex but these people building brands, including companies and associations, get lost in the weeds over and over. The details make the situation worse if the basic foundations are missed.

The keys are:

The public’s perception (and more than one carrier’s perception) is that agents are an expensive middle man that also gets in the way of the carrier’s relationship with the insured. Agents are inconsistent in their own offices in addition to expectantly being inconsistent between themselves. The messages sent then are inherently and grossly unclear and inconsistent. The money being spent is completely inadequate. Four strikes.

If agents want to thrive on the opportunities this morass presents, they will have to do so individually because to do so with the industry is like herding cats. It can be done with enough strategy, discipline, execution and a little technology at the individual agency level if the agency owners are bold. Thrivers in this industry going forward will be bold. Are you bold?