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March 1, 2018

How to Earn Consumers’ Trust

Summary:

The insurance industry is built on trust. So why is there so little trust between consumers and the insurance industry?

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Let’s talk about trust. The insurance industry is built on it. So why is there so little trust between consumers and the insurance industry?

According to the 2018 Edelman Trust Barometer, financial services as an industry has improved in the percentage of those surveyed who trust the industry from 48% in 2014 to 54% in 2017. While the level of trust is at least moving in the right direction, financial services does rank dead last among all of the sectors polled. Last.

Trust is not something that comes easily these days anywhere, much less in the world of insurance and other financial services. This is not great news for an industry in which we literally sell a promise to be there when bad things happen to consumers and businesses, such as car accidents, fires or deaths.

Many insurers may think of data along these lines:

Consumers trust and understand that, at the end of the day, insurance carriers are in the business of data. It’s at the core of what we do, the data is how premiums are decided, how to best protect assets and develop the fastest solutions when there is a loss, how products are marketed and much, much more. Of course, carriers can be trusted to protect that data and consumers’ privacy.

As a regulator who often hears from consumers, I wouldn’t bank on that. Simply put, there is a lot of uncertainty around data these days. Cyber-attacks are in the news seemingly endlessly, from Home Depot, to Target, to Equifax. And if consumers know one thing, it’s that their data is out there, often on old systems that may or may not be properly maintained, and many big-name companies may not have succeeded in protecting that data, and thereby their privacy.
Consumers also often are bombarded with long applications or questionnaires, sometimes with rather personal questions. Often, they are left baffled trying to understand, “Why would these people need this information?”

See also: When Not to Trust Your Insurer  

Many agents or brokers requesting the data may not know themselves. Data collected by insurance companies is input into complex algorithms in trade-secret black boxes to which few have access, much less full access.

Simon Sinek provides great insight into why leaders and companies need to focus on answering the question of “why” to maintain the focus as anyone—leaders, product managers, agents and brokers—starts the process and as any of us review whether that vision is working. Sinek says that people should consider whether “Starting With Why” in innovation will instill trust and cooperation.

If companies are transparent about exactly why data is collected, consumers can understand how it affects them. Transparency also can allow agents, brokers, consumers and others collecting the data to ensure it is as accurate as possible.

This issue is being discussed inside insurers, at insurance departments and among consumers. There can be scary downsides to secret data black boxes in insurance and otherwise.

Insurers could also use the data to provide feedback to help consumers better manage their risks. It’s important that, as new technology brings new opportunities, those asking for the information fully explain the “why” behind requests for data.

Insurance is global, and changes in other countries may cause changes that affect U.S. consumers and companies. As the General Data Protection Regulation (GDPR) is on the eve of its effective date of May 25, 2018, in the E.U., the U.S. has the opportunity to learn from the experiences.

When the Iowa Insurance Division addresses these topics with companies, we point out the obvious. These are your consumers. If consumers ask the question about what data is being used and from what point, they should gain a clear response so they can understand fully before they consummate the transaction.

See also: 6 Lessons in Trust From Retailers 

Those in the insurance industry are given and trusted with much data. Because of that, much is expected.

It’s an incredible time to be in the business of insurance, and the expectations are high. The Iowa Insurance Division will continue to work with companies and consumers to discuss the proposed “why” for the benefit of all affected. After all, the insurance industry is built on trust.

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About the Author

Kay Fairchild Godfredsen became first deputy commissioner for the Iowa Insurance Division in August 2017. Most recently, she held the role of assistant general counsel at Nationwide.

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