Education Needed On All Sides For Success In UrbanInsurance Markets Its an uncomfortable feeling raging inthe pits of their stomachs–an all too familiar feeling forcustomers who live in urban areas. The feeling that someone hastreated them unfairly.

Undoubtedly, the inner-city dweller feels he or she hasexperienced a lifetime of mistreatment and inequality surroundingquality and pricing for goods and services. At times, it is as ifthere is a mysterious process that occurs when a product or serviceis offered in certain ZIP codes which spontaneously lowers thequality, yet increases its cost.

We have all experienced it one time or another, the unfairnessin what we pay for and what we receive. And the industry perceivedto be one of the largest perpetrators of this injustice is theinsurance industry.

For more than two decades, I have earned my living sellinginsurance to Philadelphias urban communities. If one reality isquite apparent, it is the “love-hate” relationship between theinsurance industry and the urban community.

The perception of customers in urban communities is that theinsurance companies “love” the profitability, but “hate” therisk.

Conversely, the perception of the insurance company is thaturban communities have seemed to “love” filing claims, but “hate”paying adequate premiums.

Are these perceptions real or imagined?

A few colleagues and I decided to see if it truly was a “thinline” between love and hate, and if so, could we find ways to erasethe line so that everyone could become a winner. Everyone loves towin.

Over the past nine years, within the fourth largest city in theUnited States, a group of Philadelphia agents has pioneered a quietmovement that has changed the way several insurance companies haveconducted business for tens of thousands of urban consumers. Thename of the organization is The Insurance Cooperative.

Integrated in this movement is a different perspective andpositive outcome, which has benefited not only the urban consumerand the insurance agent who sells the policies in the urban areas,but also the insurance companies who have dared to venture intowaters rumored to be shark infested and dangerous.

We have turned a virtually losing scenario into a winningsituation for all. In doing so, we have become part of thesolution.

Insurance is a necessary aspect of life. It affects useconomically, socially, psychologically and spiritually. Clientswho go without it may experience financial loss, stress or evenpunitive measures. Yet consumers know little about it.

Understanding insurance and the industry should be a highpriority in our communities.

Consumers need insurance for peace of mind. Insurance protectstheir hard-earned assets from most unforeseeable accidents orcatastrophes. Unfortunately, rates and customer services varydepending upon where one lives.

In my experience, customers living in our inner-cityneighborhoods have found the cost of insurance is usually highwhile the quality of the policies and the customer service is oftenlacking.

Historically, the term redlining has been associated with theinsurance industry when it fails to provide affordable,comprehensive insurance policies to certain segments of thepopulation. This phenomenon is usually targeted toward urbancommunities.

Proponents argue that risk and losses are higher in the urbancommunities, therefore rates should be higher. Opponents argue thatthe statistics are skewed and it is unfair to discriminate betweenindividuals based upon their demographics.

Clearly, there are real and perceived challenges that existbetween the consumer, the agent and the insurance carrier in urbanareas resulting in the need for re-education and a collectiveapproach.

Another concern is the adversarial relationship betweeninsurance companies, agents and the consumers. Are most urbanresidents out to defraud the insurance company–to make a quick buckat all costs? Are most urban insurance agents in business to sellyou the least quality products for the highest price? And wouldmost insurance companies be opposed to doing business in urbanareas if they felt that their ability to yield a profit was aboveaverage?

If you answered no to all of the above, you are on the righttrack.

In part, this adversarial relationship stems from fraud.

Does insurance fraud exist? Absolutely, and to the tune ofbetween $85 billion to $120 billion a year. The impact of thisfraud costs each household an average of $200 to $330 a year inhigher insurance premiums, according to figures released by theInsurance Information Institute.

However, this fraud is being committed by a small segment of thepopulation. Yet, we all allow those relatively few culprits taintthe entire insurance environment with the urban areas absorbing themajor brunt of the cost.

We must all make the connection of higher insurance cost beingan outgrowth of unscrupulous lawyers, doctors, auto repair shopsand insurance adjusters working on the behalf of the insuredwilling to file fraudulent claims. Honest insurance agents andpolicyholders should not take the “ostrich approach,” keeping theirheads down in the sand while their “butts” are in the air beingkicked by a lack of urban markets and higher insurance rates.

The Philadelphia agents working through The InsuranceCooperative believe that the solution lies in changing the way weall think through re-education. There is a need to re-educate theconsumer, insurance agents and companies alike.

First, consumers must not view insurance as an unnecessarymalady, but rather as an “asset protection” mechanism reserved tomake the insured “materially whole” again in the event of a validclaim.

As a further example of re-education, an auto liability policyclaim should be filed only when real injuries have occurred. Byfiling a bogus or exaggerated claim, the insured is committinginsurance fraud–the No. 1 contributing factor to higher insurancerates for us all.

When caught, not only will their claims be denied, but they alsocan face possible criminal prosecution. Insurance consumers need toknow this, and it behooves the agent to emphatically state this tothe insured.

Second, insurance agents and brokers, despite the unwillingnessof most insurance companies to conduct business in the urban areas,need to change their belief system toward serving the urbanconsumer. Even if the “shoe sizes” (insurance products) arelimited, agents should not take the common approach that one sizefits all. Producers must determine which client qualifies for thebest rate and then work collectively with other agents to attractcompetitively priced companies to do business to serve thesequalified clients.

Finally, agents need to set up community meetings with theirunderwriters and urban consumers. The reality that underwriterswill see is that their insurance policyholders and agents who selltheir policies are honest, law-abiding citizens.

In these settings, the companies can work hand-in-hand withconsumers and agents to collectively address the real (notimagined) challenges faced in the urban environments. This processleads to collectively isolating and activating win-win scenariosfor all involved.

Changing the way we perceive one another through a comprehensivere-education model that collectively addresses the real challengesultimately will lead to more affordable, quality insurance coverageto those that qualify regardless of where they reside.

Put it to the test. Organize the insurance professionals, bothcompany representative and agents to attend community meetings toeducate and inform the insurance consumers. Because, whatever thefuture of the insurance industry, we can be sure of one thing, weall need it.

The Insurance Cooperative has proven that you can offercomprehensive insurance products in urban communities that areaffordable, but at the same time yield a “fair” profit for theinsurance companies, if we are all willing to go the extra mile. Weall can indeed be winners.

Donald W. Lewis is president and chief executive officer ofThe Insurance Cooperative in Philadelphia and the author of thebook “Everything to Win, and Nothing To Lose.” He can be reachedat [email protected].

Reproduced from National Underwriter Edition, June 23, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.