What We Have Here Is A Failure To Communicate

The firestorm over executive bonuses at American International Group earlier this year underscores the deep distrust everyday Americans harbor for financial services companies, even before the controversial AIG bailout by taxpayers. Insurers can tell themselves they are not affected by the AIG meltdown, but they are kidding themselves.

It is certainly true that AIG's insurance operations were not part of the problem. And it is true that insurers in general have behaved far more responsibly than their banking brethren in protecting their assets as this recession unfolded.

The majority of Americans, however, will not make a distinction between AIG and other insurers. The brush with which the industry will be painted will be broad and indiscriminate, unfair as it is.

From this point forward, any action taken by an insurer that is perceived to be unfair or unjust will be seen through a hyper-populist filter. Consumer advocates, trial lawyers and lawmakers will find a far more malleable response to charges of insensitivity and corruption and calls for reform. The blogosphere will become even more overheated.

That is why it is so troubling that at a time when proactive and transparent communication is critical in telling the insurance story, many insurers are cutting back their communications efforts, both in budget and staff.

Insurers whose financial reserves took a beating last year understandably looked for ways to cut expenses. Every function was fair game, including marketing communications.

But some companies used a meat cleaver rather than a scalpel, leaving them even less able to respond to attacks by an angry public. The fact is, when a fight is just beginning, an army can't draw down its forces unless it is willing to admit the possibility of defeat.

It is time for insurers to initiate a serious dialogue with policyholders about the relationship between risk and insurance costs. An insurance policy is not an open-ended promise to pay in the event of loss but a financial transaction that carries rights and responsibilities for both insurer and policyholder.

It is also time for every company to redouble efforts to communicate with their stakeholders in as many ways as possible. To start, companies need to spend more time developing relationships with the non-insurance media.

At the Property/Casualty Insurance Joint Industry Forum back in January–and as reported here in National Underwriter–Connecticut Insurance Commissioner Thomas Sullivan said the industry needed to do a better job educating the general and non-insurance business media. He noted that interviews he conducts that should have taken five-to-10 minutes end up taking 40 minutes because consumer media reporters understand so little about insurance fundamentals.

At the same time, we must also recognize that the communications landscape has changed dramatically and unalterably. Newspapers in print form are vanishing, niche marketing is replacing mass media marketing, and the use of social media–such as Facebook, Twitter, YouTube, etc.–has expanded far faster and wider than anyone could have anticipated even two years ago.

Every policyholder can now be an online, self-designated “reporter” and commentator, and reach an audience of thousands in a split second.

Building and maintaining a positive image and compelling brand takes time as well as an ironclad commitment to listen and respond to all forms of criticism–even the most strident.

Every company desires to control its corporate message but too often does so to the point of dismissing any criticism as uninformed. Insurers must make every effort to see themselves as policyholders do, and to frame their messages accordingly. We must avoid the urge to dictate rather than persuade.

Finally, at too many insurance companies, corporate communications professionals have no seat at the table when strategy decisions are made. A move to stop writing a class of business or file a rate increase carries serious reputational consequences. Having the company's professional communicators in the room when such a decision is made gives them extra time to develop the most effective plan and an important contextual perspective.

Insurer communicators represent a critical line of defense for the industry when we are headed into a most contentious period. This is not the time to cut their numbers.

Tom Wetzel is president of Thomas H. Wetzel & Associates, a marketing communications firm serving the insurance industry. For more information, contact him at twetzel@wetzelandassociates.com or go to www.wetzelandassociates.com.