A Little More PR Couldnt Hurt

Most consumers are clueless about how the insuranceindustry works

Mark E. Ruquet

If you, the reader, haven't noticed yet, this is my firstcolumn. The road I have taken to come to this point in my career isin a way typical of the experience many of you have had coming intothe insurance business.

I, like many agents and brokers, never thought I would beworking in insurance. Of course, I'm at a different end of thisbusiness as a reporter/editor. I get to be an observer and I have alicense to ask questions. Only the answers I get go into print andare not ensconced in the boardroom.

Now I am attempting to comment on what I have seen and heardover the years. When I came here, there was for me, as probably formany of you, sheer confusion over what was going on. It's going onmy fourth year. I've come to understand this business better andrealize there is a chasm of understanding between the insuranceindustry and the rest of the real world.

My perception of this industry was like many consumers who buyinsurance today auto, home, life, health. What more was there? I'velearned differently.

I've also learned something that no one ever told me way backwhen I purchased my first auto insurance policy. Yes, I knew I hadto buy car insurance because the law said I had to in order todrive, but what about the social context? What about peace of mindor protection against catastrophic loss? I don't recall anyone evermaking that case to me, especially my insurance agent, or myknowing enough to ask.

I purchased my insurance and started driving. That was allinsurance meant to me until I hit a tree in the middle of nowhere.I fixed the car up, reported the accident, had no collisioncoverage on the car, and saw my rate go up. The tree never filed aclaim.

Today, I understand why my rate went up. I understand better thenuances of underwriting. I understand the factors that go intopremium pricing. I'm involved in this business now.

But most consumers are not. Many people who do buy insurancedon't understand why their premiums increase after a claim, or evenafter no claim. Insurers have deep pockets, they reason. Raisingpremiums is viewed as taking advantage of them.

They have an accident and think, “Why do you renege on thisunderstanding of providing insurance at a set price and then raisemy premium after I file a claim?”

I don't think a customer has ever gotten a satisfactoryanswer.

Which raises the question: Does the insurance industry have apublic relations problem?

During a conference of the Minneapolis-based ProfessionalLiability Underwriting Society in Orlando back in 2002, TV talkshow host Charlie Rose asked this question. Sax Riley, who was thenon his way out as the head of Lloyd's, said the industry had done apoor job maintaining its standing of reliability with the public,as well as combating the “deep-pocket syndrome.”

Constantine Lordanou, president and chief executive officer ofArch Capital Group Inc., based in Bermuda, who was also part of apanel of executives speaking about the industry, said that whilethe media bore part of the fault for focusing on the negative, theindustry had to accept its own share of blame for not getting itsstory out about helping individuals and assisting in economicrecovery after disasters. He cited Sept. 11 as an example.

“The story has not come out, and we have to blame ourselves fornot getting the story out,” he said then.

Has that story come out in the past couple of years? I don'tthink so. Indeed, with the court battle over coverage for the WorldTrade Center, you have to wonder whether the public believes theindustry is trying to talk its way out of its obligations to pay ona policy technicality.

From the text of a speech delivered by Lord Peter Levene,current chairman of Lloyds, in London in the beginning of February,talking about the industry and the need for improvements, he said:“Insurance plays a key role both in the economy and wider society,but we have traditionally done a very poor job of communicatingthese roles and working together collectively to advance them.”

The hard market did not help. I can tell from a few friends ofmine who watched their rates double or even worse for theirbusiness during the hard market, and could not understand why.These people have certainly not grown fonder of the industry.

Agents and brokers, as the first line of contact with thepublic, have a responsibility to explain the process to customers.But they cannot do it alone. Like the educational information andpartnership some insurers have put together to educate consumersabout how to reduce or eliminate certain claims, the samefacilities need to be created to educate the public about how theindustry works and why.

We need a plan on how agents can better market the reputation ofthe industry, besides how to sell products.

If one thinks that the reputation of insurers does not needimprovement, consider the current debate over federal chartering.Legislators will ultimately decide the fate of the industry'sregulation.

Despite all the political contributions associations make tolegislators for influence in the decision-making process, themembers of the House and Senate ultimately answer to voters. Andthose voters outnumber all the company executives, agents andbrokers combined.

If there is a groundswell of support to alter the currentsystem, in whatever incarnation legislators finally decide, noinsurance industry association would have enough influence to alterthe debate in their favor. Ultimately, legislators do report to thevoters.

A little industry public relations geared to consumers wouldn'thurt.

Mark Ruquet is an assistant editor at NU, covering the agentand broker beat. He may be reached at [email protected].

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, March 19, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.