Is Insurance Like Buying Paper Towels?

For the love of God, please, please, PLEASE stop comparing buying insurance to buying a consumer product on Amazon!

This is an open letter to everyone writing about “disrupters” and the insurance “customer experience,” citing “industry experts” and “top insurance executives”: For the love of God, please, please, PLEASE stop comparing buying insurance to buying a consumer product on Amazon! Case in point — from an “industry expert”:
“What’s holding most insurers back from meeting the speed and performance of a customer experience leader like Amazon? In a nutshell, siloed legacy systems.”
No, siloed legacy systems are NOT the reasons why the insurance industry doesn’t meet the “customer experience” speed and performance of Amazon. The reason the insurance industry doesn’t meet the “customer experience” provided by Amazon is because WE DON’T SELL WHAT AMAZON SELLS! Amazon sells consumer products. Insurance is not a product. If you’re compelled to label insurance, it's a process, not a product. See also: Insurance Coverage Porn   Another case in point from a recent Reuters article that quoted Ajit Jain, Berkshire Hathaway's “top insurance executive”:
" can deliver something to you in four hours. If people can buy paper towels on the internet, why not insurance?"
Sorry, sir, but buying insurance is NOT the same as buying paper towels. Yes, technology can — and should — be used to improve the effectiveness and efficiency of the insurance process, but phone apps and big data are not going to make a silk purse out of a sow’s ear. (BTW, there are some great silk purse bargains on Amazon right now if you hurry, and the good news is that choosing the wrong one likely won’t bankrupt you, as can happen if you choose the wrong insurance “product.”) Not every buying transaction can or should be reduced to an Amazon-like “1-click” purchase. If I want to buy paper towels, does Amazon need to ask me to explain what I’m going to use them for? Or who is going to use them? Or where I’m going to use them? Or…? The insurance PROCESS starts with assisting individuals, families and organizations in identifying their many — and often unique — exposures to financial loss. That information is then used to determine what is the best combination of insurance policy forms and risk management techniques to minimize the likelihood of a serious or even catastrophic financial loss. And if there is a loss occurrence, the process continues in both a financial and emotional way. “Insurance” is not a commodity product. It’s a regulated, service-oriented process where the “product,” if you will, is a complex, detailed legal contract that is highly litigated. To compare it to paper towels or any other online consumer purchase is infantile. How many bad Amazon purchasing decisions can lead you to financial ruin? See also: Innovation: ‘Where Do We Start?’   Why do we listen to and enable people who lack historical perspective and clearly are fundamentally clueless about how the insurance industry works and why it works that way, who really don't understand the overriding mission of this industry? Technology is a tool and a means to an end, the “end” being protecting individuals, families and organizations from financial catastrophe. Unless it’s the product “disrupters” and consultants are selling... then it's the end in and of itself. Caveat emptor.

Bill Wilson

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Bill Wilson

William C. Wilson, Jr., CPCU, ARM, AIM, AAM is the founder of Insurance He retired in December 2016 from the Independent Insurance Agents & Brokers of America, where he served as associate vice president of education and research.


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