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January 12, 2018

Insurance: The Land of Obscure Terms

Summary:

Telling the insureds they must read and understand policies full of obscure terms is an awesome way to repel the public.

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What is a fast way to sow distrust? Use words the general public does not understand. How good is the insurance industry at doing this? Excellent! We might set the bar if it wasn’t for attorneys (but wait–insurance contracts are written by attorneys!).

Think about how normal people view insurance terms. “Would you like blanket coverage, Mr. Jones?” “Blanket” may have significant meaning to insurance people, but I am willing to bet 90% of the American public think blanket coverage means having a blanket big enough to cover the bed. Just saying.

Or take, “owned/nonowned auto.” To a normal person, they own a car or they do not own a car. They do not simultaneously own and “nonown” a car. What does “nonown” even mean? “If I don’t own that car over there, or even the car my buddy is letting me test drive, why do I need insurance? Are you wanting me to buy insurance for other people’s cars? Insurance is a ripoff!” Most people look at it this way, even quite a few of the people who need the coverage look at it as if the term “owned/nonowned” is completely oxymoronic.

In both cases, I see producers use the terms as if their prospects had full understanding. In reality, one reason they do this is because they don’t understand the terms adequately, so rather than learning the coverages well enough to articulate what protection each conveys, they stick to industry jargon hoping no one will ask them a question. It is the same reason many people do not use coverage checklists.

Another “wonderful” coverage is DIC. I find many insurance people have not even heard of DIC coverage. They do not know what “DIC” even stands for. It is an acronym for “differences in condition.” So how does buying a policy titled “Differences in Condition” provide insurance? I buy an auto policy for an auto. I buy workers’ compensation for workers. Differences in condition is rather ethereal.

See also: The World Is Flat; Insurance Is Round  

Insurance language is often ancient. The origins of some terms are traceable to the 1700s, sometimes to property being insured then that does not even exist in our world today, at least not outside museums. For legal purposes, that history is important because we can trace case law specific to certain words and terms back 200-plus years sometimes. We cannot afford to abandon that case law by abandoning old terms.

Simultaneously, relative to customer relations and sales, holding on to such terms is a trap. Who in America outside the industry knows intuitively that inland marine has nothing to do with water? (In fact, who outside insurance would ever even think of using the term “inland marine” to describe risks out of water?)

Much future success then depends on using common language rather than insurance language. The resistance comes from a few places. The first is that quite a few insurance people do not understand their coverages/forms, so they insist on using insurance words to hide their ignorance. Or they use insurance terms to sound smarter than they are. One facet of this industry that has not changed in the last 10, 30 or 50 years is the need to read and understand forms. I am befuddled how anyone thinks they can competently sell or underwrite without knowing the forms. If you use insurance terminology to hide not knowing, go study the forms! Take quality CE classes.

Another reason people insist on using insurance language is fear of being sued. The idea is that, by explaining a coverage using common language, a client may be unintentionally misled into thinking they have a coverage they do not possess. That fear is legitimate, but, to achieve success, one better figure out how to explain insurance in layman’s terms because, if people do not trust you, they are far less likely to buy from you.

An agent’s job is to help people understand why certain coverages are important to their well-being. An agent is THE middle man. One reason the agent is the middle man is that you are paid to be the middle man. The middle man is paid to interpret the insurance language and translate it. The situation is no different from being paid to translate Greek at the U.N. Insurance language can be just as difficult. Underwriters cannot always explain what is and is not covered once you go through the exclusions, the add backs, the exclusions to the add backs and so on, so, if they cannot explain it, why should we expect the insured to understand it?

Additionally, telling the insureds it is their responsibility to read policies that contain such terms, terms so many in the industry lack the ability to explain, is an awesome way to repel the public. I understand the purpose from an E&O perspective, but from a sales/marketing/public relations perspective, telling insureds to read their policies and call if they have questions is absolutely idiotic. It is disingenuous, too, because no one really wants insureds to call with questions. The nightmare is the retired person who actually reads a policy thoroughly and has nothing better to do than ask questions.

See also: Insurance Coverage Porn  

The opportunity truly lies in becoming knowledgeable, even an expert. Attend quality CE programs with other people who truly want to learn rather than sitting in a room of people more interested in reading a newspaper. You learn more in environments with better agents.

If you know your coverages, or not, and really need help learning to discuss coverages, let me know. We have a first class program for teaching coverages in ways that simultaneously give you the tools for asking the right questions and articulating the exposures and coverages in safe layman’s terms.

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About the Author

Chris Burand is president and owner of Burand & Associates, a management consulting firm specializing in the property-casualty insurance industry. He is recognized as a leading consultant for agency valuations and is one of very few consultants with a certification in business appraisal.

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