Years ago, a memorable Mercedes-Benz advertisement reminded readers that, in order to determine the true value of a car, consumers should focus not on what a car costs but on what the car is worth.
If distinguishing between cost and worth is challenging in the auto industry — featuring products that are so tangibly different — is it any wonder that the insurance industry finds this challenge even more difficult? Compounding this difficulty are advertising campaigns crafted to exploit the human tendency to simplify buying decisions by promoting the myth that personal insurance products are a commodity.
Insurance practitioners should become more vigilant in educating consumers of the dangers of buying insurance protection based on cost and not value.
The following are four ways to help consumers more closely consider the worth of the personal insurance products they are buying:
1. Start with the end in mind
In his book, "The 7 Habits of Highly Successful People," author Stephen Covey reminds readers about the importance of starting any endeavor by first focusing on the desired end result.
Consumers should be reminded that in the event of a large loss, their insurance coverage will likely become their most important asset. Prioritizing the allure of short-term savings over the asset protection consumers may later need can be disastrous.
2. Document the differences
Insurance consumers who have been preconditioned to prioritize cost should be reminded to be wary of offers that look too good to be true.
To help consumers see the coverage deficiencies in cut-rate policies, take extra time to document the coverage that is (and especially is not) provided by different policies.
Go beyond simply reviewing the coverage limits on a declarations page and take the extra steps to document the actual losses that are and are not covered by different policies. Also explain how variances in the loss settlement provisions of policies will determine how claims are actually paid.
3. Focus on protection first
Recognize the natural tendency to focus on cost, and shift the conversation toward protection by providing a process that helps consumers examine their many Homeowners' or Auto risks, often for the first time.
This protection-first focus promotes the review of different coverage solutions to manage those risks that are most important.
4. Offer more than just insurance
Although buying insurance coverage is not the only strategy available to help consumers manage their many personal risks, insurance practitioners rarely present other risk management strategies that are not risk-transfer oriented.
Shouldn't insurance practitioners do all they can to make consumers aware of the many risk mitigation strategies available to reduce the risk of losses?
Among the many valuable — and widely available — risk reduction services are residential leak defense systems to help detect and prevent a plumbing leak, and devices that restrict a driver's ability to receive or transmit text or e-mail messages while operating a vehicle.
After all, preventing losses is far more valuable than indemnifying them.
Tim O'Brien is vice president, private client group for Assurex Global.
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