There is an “information asymmetry” in the insurance industry, according to Christian Bieck, global research leader - insurance, IBM Institute for Business Value. He’s referring to a common challenge in the industry, which is that insurance policies are often too complex and verbose for the average consumer to understand. As a result, consumer trust in the industry is strained, and understandably so. Why trust something that you don’t understand?
The industry’s somewhat tarnished reputation was a hot topic in a recent panel discussion at the Future of Insurance Canada event, run by Reuters. Bieck shared some statistics from consumer research he’s spearheaded at the IBM Institute, which included the headline figure that only 58% of consumers trust their insurance company. “That should tell you a lot about the insurance industry’s reputation,” he said.
“I did my very first study on consumer attitudes towards insurance in 2007, and at that point, we uncovered a series of gaps: the trust gap, perception gap, and the gap between what’s promised and what people get,” said Bieck. These gaps, while they’ve been in existence for over a decade, have been challenged further by the COVID-19 pandemic in terms of what customers expect from their insurers. Bieck added: “It really separates the wheat from the chaff in terms of customer experience, of promises given and kept, or promises given and broken.”
He then referred to the mindset held by some consumers – especially the 42% with no trust in the industry – which is that the claimant is made to feel like “a suspect,” or fraudster when they try to seek compensation for a loss. This is something that industry panellists – The Co-operators CEO Rob Wesseling, Insurance Evolution Partners founder Bryan Falchuk, and Intact’s president of Canadian operations Louis Gagnon – all refuted, but they did acknowledge some industry-wide shortcomings, especially when it comes to communication.
“From my experience, the overwhelming majority of carriers are trying to find coverage, not find the ‘gotcha,’ but that doesn’t mean the expectation on the customer side is the same,” said Falchuk. “And so, we almost have this initial hurdle of: ‘No, I’m on your side, trust me.’ But when only 58% trust their own insurer […] it’s a tough spot to start in.”
Falchuk referred to the business interruption cases that have garnered lots of public interest and media coverage since the start of the coronavirus pandemic. Generally, the disputes centre around the fact that most standard commercial insurance contracts exclude coverage for pandemic and communicable diseases – something that many claimants said they did not know prior to their loss. While that wording is clear to industry experts, it has caused much distress and confusion among customers. Falchuk pointed out: “It’s not always the case that, when you’re facing the loss of your business, you’re going to fully understand the legalese or the intricacies [of the policy wording].”
The Co-operators chief executive Rob Wesseling said the industry generally does quite a “poor job” of communicating what is included in a policy, what isn’t included, and why. He described it as a “significant challenge,” centred around communication, not only in terms of what policies will cover, but also around how the industry works as a whole, how pricing is determined, and why, of late, carriers have had to make some changes to the coverage they’re willing to offer.
“I think the bigger issue is that we’re not we’re not communicating well, in terms of one of the core challenges that our society faces. We’re increasingly unable to afford the physical risks that we’re exposed to, and we’re not telling anyone that,” Wesseling commented. “We communicate in terms of: ‘The market’s hard, the rates have to increase, the underwriting has to change.’ That’s not all that compelling to a family or a business insurance consumer.
“Instead, I believe we should be communicating those messages in terms of the risk, and in terms of the role that we can play in helping our clients manage those risks. And we’ve not done that as well as we could have. [...] I believe it could have a significant impact from a reputational perspective as well. I think it’s actually a requirement if we’re going to play the role that we should play moving forward.”
