Tag Archives: a.m. best

Can Insurers Do More to Reduce Injuries?

The Herald Tribune in Sarasota, FL, Nov, 14, 2016 stated a number of actions that employers need to take in the light of new workers’ compensation regulations in Florida: “Effective claims advocacy, management and communication, along with robust risk management and work safety programs,” are required to follow regulations and run profitable businesses.

Regardless of jurisdiction, implementing regulations is never as simple as it sounds, and they create challenges for both employers and insurers. The primary challenges are typically cost and resources.

For Business:

Workers’ compensation is viewed as a regulatory and financial burden, with claims management being the major focus.
Actively managing workers’ compensation and the associated risk is good business practice, yet the majority of businesses (particularly small businesses) just can’t afford current risk management tools and methodologies. Internal resources are stretched, and, despite best intentions, it can be a difficult task to wade through a plethora of information to translate, implement and monitor regulatory compliance and risk management. As a result, there is often a reliance on consultants, at significant cost to businesses.

See also: Does a Safe Workplace Create Large Profits?  

For Insurers:

It is not physically possible or economically feasible to conduct risk surveys, analysis and assessments on all of the employers in your portfolio, particularly in the small- and medium-sized sector. It is also not financially feasible to offer consulting services to assist in the risk management process.

So what are your differentiators? How can you add value, ensure quality of service and further engage your clients without massive additional investment?

If a simple risk profiling tool was offered by insurers, it would significantly boost their ability to assist employers in better managing their workers’ compensation costs and impacts. RiskAdvisor has developed such a tool, which allows a business to:

  • Assess the current status of health and safety risk;
  • Benchmark performance within its industry using global A.M. Best data;
  • Identify gaps in health and safety business processes;
  • Prioritize resources;
  • Offer specific solutions to better manage health and safety risk; and
  • Facilitate continuous improvement.

The simple-to-use system highlights known industry hazards, good work/health/safety/injury management practice and what risk management controls are (or could be) in place. It delivers performance benchmarks and the ability for employers to provide their own risk ratings.

Employers seeking to understand their broader risks can even use the RiskAdvisor system to profile industry-specific insurable and business risks.

See also: Avoiding Workplace Disaster And Workers’ Compensation Costs  

This type of tool will help an employer prioritize its activities and means insurers can drive increased client engagement and deploy support more cost-effectively. Even more importantly, the tool shifts the focus away from purely reducing claims costs to actively minimizing injuries — a win/win for insurers, employers and employees.

Here’s a sample of a checklist from the RiskAdvisor system:

Screen Shot 2016-11-28 at 2.25.03 PM

InsurTech Can Help Fix Drop in Life Insurance

No one disputes that life insurance ownership in the U.S. has been on the decline for decades.

The question up for debate is what to do about it.

The emergence of an insurtech sector is an indicator of entrepreneur and investor confidence in upside potential. The hundreds of millions of dollars being poured into technology by carriers is another.

See Also: Key to Understanding InsurTech

But before piles of capital are poured into attempts to capture the opportunity, investors and legacy insurers should reflect on the root causes of this seemingly unstoppable trend and prioritize innovations that aim at solving the biggest issues:

  • Carriers have evolved, through their own cumulative behavior over decades, away from serving the needs of the majority of Americans to meeting the needs of a shrinking, high-net-worth population
  • A declining pool of independent agents are chasing bigger policies within this segment
  • The industry has, effectively, painted itself into a corner and is trapped in a business model that, given its own complexity, is difficult to change from within

How have carriers painted themselves into a corner? 

Carriers face what Clayton Christensen termed, in his 1997 classic, “the innovator’s dilemma.” While continuing to do what they do brings carriers closer to mass-market irrelevance, today’s practices, products, processes and policies don’t change. They deliver near-term financials and maintain alignment with regulatory requirements.

It’s worth acknowledging how the carriers have ended up in this spiral, particularly the top 20, which collectively control more than 65% market share, according to A.M Best via Nerdwallet.

  • Disbanding of captive agent networks for cost reasons has also meant the loss of a (more) loyal distribution channel. The carriers that used to maintain captive agent networks enjoyed the benefits of a branded channel whose agents were motivated to promote the respective carrier’s products. They chose instead to …
  • Shift to third-party distribution, increasing dependency on a channel with less control, and where they face greater risk of commoditization. Placing life insurance products in a broad array of third-party channels, including everything from wealth management firms to brokerages and property/casualty networks, has added complexity and increased emphasis on managing mediated, non-digital channels. This focus comes at a time when other sectors are accelerating the move to direct, digital selling, aligning with changing demographics, technology trends and consumer preferences for digital-first, multi-channel relationships.
  • Product cost and complexity has raised the bar to close sales and has increased the focus on a smaller base of the wealthy and ultra-wealthy. With the exception of basic term life, life insurance products can be complex. They can be expensive. And, as a decent level of insurance at a fair premium requires a medical exam including blood and urine sampling, it takes hand holding to get potential policyholders through the purchase process. For the high and ultra-high net worth segments, the benefit of life insurance is often as a tax shelter, not simply to protect loved ones from the catastrophic consequences of unexpected earnings loss. More complexity equals more diversion from the mass market.
  • Intense focus on distribution has come at the expense of connecting with the client. Insurance company executives have long insisted – and behaved as though — the agent is the client, if not in word then effectively in deed. The model perpetuated by the industry delegates the client relationship to the agent. This has its plusses and minuses for the client, and certainly has come back to bite the carriers as they contemplate a digital approach to the marketplace where client data and a branded relationship matter. Carriers certainly do not win fans with clients – overall Net Promoter Score ratings for the insurance sector broadly are even lower than Congress’ approval ratings, and for at least one major carrier are reportedly negative.
  • The number of licensed agents is on the decline. The average age of an insurance agent or broker has increased from 37 years in 1983 and is now 59, based on McKinsey research. Agents have a poor survival rate: only 15% of agents who start on the independent agent career path are still in the game four years later. Base salary is negligible, and it’s an eat-what-you-kill business. This is a tough, impractical career path for most and has become less attractive over time.
  • The industry is legendarily slow and risk-averse. Think about actuaries – the function that anchors the business model makes a living by looking backward and surfacing what can go wrong. That is a valid role, but the antithesis of what it takes to build a culture where innovation can thrive.

What is the path to opportunity?

Here are innovation thought-starters to create value for an industry undergoing transformation:

  • Clients must be at the center of strategy. Twentieth-century carrier strategy may have been grounded in creating distribution advantage and pushing product, but 21st century success will come to those who put the client at the center of all aspects of execution. “Client centricity” is a way of operating a business, not a slogan.
  • Innovation starts with a new answer to the question, “who is the customer.” The agent is a valuable partner, but she is not the client. There is white space in the mass market – the middle class – not being served by the current system beyond a limited offering. Life insurance ownership has been linked to the stability of the middle class. We should all be concerned with the decline in life insurance ownership and lack of attention paid to this segment.
  • The orthodoxy, “insurance is sold not bought,” sets a self-inflicted set of limitations that can and should be disrupted. The existing product set may have to be pushed to clients because of its complexity, pricing, target audience, channels and near-term performance dependencies.
  • Getting the economics right and meeting the needs of today’s clients will demand a digital-first offering – from being discoverable via SEO and social on mobile screens, to supporting application processing, self-service, premium payments, document storage and downloads and connection to licensed reps whenever clients feel that is necessary. It will require full digital enablement of agents to create the right client experience, and improve revenues and expenses. Ask anyone who has purchased life insurance about his or her decision journey, and invariably you will find out that shopping for insurance is a social, multi-channel experience. People ask people whom they like and trust when it comes to making important life event-based decisions. Aligning to how people behave already is a winning approach, and is what customer-centricity is about.
  • In a world of big data, it’s ironic that the insurance sector is one of the most sophisticated in its historical use of data. Winners will realize the potential of new data sources, unstructured data, artificial intelligence and the many other manifestations of big data to personalize underwriting, anticipate client needs and create positive experiences including multi-channel distribution and servicing. Amazon, Apple and Google have set the standard on what is possible in customer experience, and no one will be exempt from that standard.
  • Life insurance products may be an infrequent purchase, but the need to protect one’s loved ones can be daily. In today’s product-push model, a continuing relationship beyond the annual policy renewal is the exception. Consider the potential of prevention services as a means of boosting lifetime value and client loyalty. In a world full of insecurity, there is a role for a continuing conversation about prevention and protection. But the conversation must be reimagined beyond pushing the next product to one that places a priority on serving the client.
distribution

Insurance 2.0: How Distribution Evolves

At American Family Ventures, we believe changes to insurance will happen in three ways: incrementally, discontinuously over the near term and discontinuously over the long term. We refer to each of these changes in the context of a “version’ of insurance,” respectively, “Insurance 1.1,” “Insurance 2.0” and “Insurance 3.0.”

The incremental changes of “Insurance 1.1” will improve the effectiveness or efficiency of existing workflows or will create workflows that are substantially similar to existing ones. In contrast, the long-term discontinuous changes of “Insurance 3.0” will happen in response to changes one sees coming when peering far into the future, i.e. risk management in the age of commercial space travel, human genetic modification and general artificial intelligence (AI). Between those two is “Insurance 2.0,” which represents near-term, step-function advances and significant departures from existing insurance processes and workflows. These changes are a re-imagination or reinvention of some aspect of insurance as we know it.

We believe there are three broad categories of innovation driving the movement toward “Insurance 2.0”: distribution, structure and product. While each category leverages unique tactics to deliver value to the insurance customer, they are best understood in a Venn diagram, because many tactics within the categories overlap or are used in coordination.

venn

 

In this post, we’ll look into at the first of these categories—distribution—in more detail.

Distribution

A.M. Best, the insurance rating agency, organizes insurance into two main distribution channels: agency writers and direct writers. Put simply, agency writers distribute products through third parties, and direct writers distribute through their own sales capabilities. For agency writers, these third-party channels include independent agencies/brokerages (terms we will use interchangeably for the purposes of this article) and a variety of hybrid structures. In contrast, direct writer sales capabilities include company websites, in-house sales teams and exclusive agents. This distinction is based on corporate strategy rather than customer preference.

We believe a segment of customers will continue to prefer traditional channels, such as local agents valued for their accessibility, personal attention and expertise. However, we also believe there is an opportunity to redefine distribution strategies to better align with the needs of two developing states of the insurance customer:those who are intent-driven and those who are opportunity-driven. Intent-driven customers seek insurance because they know or have become aware they need it or want it. In contrast, opportunity-driven customers consider purchasing insurance because, in the course of other activities, they have completed some action or provided some information that allows a timely and unique offer of insurance to be presented to them.

There are two specific distribution trends we predict will have a large impact over the coming years, one for each state of the customer described above. These are: 1) the continuing development of online agencies, including “mobile-first” channels and 2) incidental sales platforms.

Online Agencies and Mobile-First Products

Intent-driven customers will continue to be served by a number of response-focused channels, including online/digital agencies. Online insurance agencies operate much like traditional agencies, except they primarily leverage the Internet (instead of brick-and-mortar locations) for operations and customer engagement. Some, like our portfolio company CoverHound, integrate directly with carrier partners to acquire customers and bind policies entirely online.

In addition to moving more of the purchasing process online, we’ve observed a push toward “mobile-first” agencies. By using a mobile device/OS as the primary mode of engagement, the distributor and carrier are able to meet potential customers where they are increasingly likely to be found. Further, mobile-first agencies leverage the smartphone as a platform to enable novel and valuable user experiences. These experiences could be in the application process, notice of loss, servicing of claims, payment and renewal or a variety of other interactions. There are a number of start-up companies, some of which we are partnered with, working on this mobile-first approach to agency.

To illustrate the power of a mobile-first platform, imagine a personal auto insurance mobile app that uses the smartphone camera for policy issuance; authorizes payments via a payment API; processes driving behavior via the phone’s GPS, accelerometer and a connection to the insured vehicle to influence or create an incentive for safe driving behavior; notifies the carrier of a driving signature indicative of an accident; and integrates third-party software into their own app that allows for emergency response and rapid payment of claims.

Incidental Channels

In the latter of the two customer states, we believe “incidental channels” will increasingly serve opportunity-driven customers. In this approach, the customer acquisition engine (often a brokerage or agency) creates a product or service that delivers value independently of insurance/risk management but that uses the resulting relationship with the customer and data about the customer’s needs to make a timely and relevant offer of insurance.

We spend quite a bit of our time thinking about incidental sales channels and find three things about them particularly interesting:

  1. Reduced transactional friction—In many cases, customers using these third-party products/services are providing (or granting API access to) much of the information required to digitally quote or bind insurance. Even if these services were to monetize via lead generation referral fees rather than directly brokering policies, they could still remove purchase friction by plugging directly into other aggregators or online agencies.
  2. Dramatically lower customer acquisition costs—Insurance customers are expensive to acquire. Average per-customer acquisition costs for the industry are estimated to be between $500 and $800, and insurance keywords are among the top keywords by paid search ad spend, often priced between $30 and $50 per click. Customer acquisition costs for carriers or brokers using an incidental model can be much lower, given naturally lower costs to acquire a customer with free/low cost SaaS and consumer apps. Network effects and virality, both difficult to create in the direct insurance business but often present in “consumerized” apps, enhance this delta in acquisition costs. Moreover, a commercial SaaS-focused incidental channel can acquire many insurance customers through one sale to an organization.
  3. Improved customer engagement—Insurance can be a low-touch and poorly rated business. However, because most customers choose to use third-party products and services of their own volition (given the independent value they provide), incidental channels create opportunities to support risk management without making the customer actively think about insurance—for example, an eye care checkup that happens while shopping for a new pair of glasses. In addition, the use of third-party apps creates more frequent opportunities to engage with customers, which improves customer retention.

Additional Considerations and Questions

The digital-customer-acquisition diagram below shows how customers move through intent-driven and opportunity-driven states. Notice that the boundary between customer states is permeable. Opportunity-driven customers often turn into intent-driven customers once they are exposed to an offer to purchase. However, as these channels continue developing, strategists must recognize where the customer begins the purchase process—with intent or opportunistically. Recognizing this starting point creates clarity around the whole product and for the user experience required for success on each path.

intent

Despite our confidence in the growth of mobile-first and incidental strategies, we are curious to see how numerous uncertainties around these approaches evolve. For example, how does a mobile-first brokerage create defensibility? How will carriers and their systems/APIs need to grow to work with mobile-first customers? With regard to incidental channels, which factors most influence success—the frequency of user engagement with the third-party app, the ability of data collected through the service to influence pricing, the extensibility of the incidental platform/service to multiple insurance products, some combination of these or something else entirely?

Innovation in how insurance is distributed is an area of significant opportunity. We’re optimistic that both insurers and start-ups will employ the strategies above with great success and will also find other, equally interesting, approaches to deliver insurance products to customers.

Will Google Slash Allstate’s Revenue?

One of the most costly open secrets of the American economy is how much people pay for brokers who sell them an over-priced product that the government requires them to buy if they want to own a car or a house.

The product in question is so-called personal lines property/casualty insurance, and there’s a good chance you are among those who are paying insurance agents a whopping $50 billion in commissions to sell you.

Now Google and WalMart are among the companies that are trying to take a bite out of that enormous inefficiency.

Before getting into the details, let me disclose my interest in this concept. Back in 1995, when my consulting firm was getting off the ground, I had an opportunity to pitch a new business idea to a trio of partners at Boston’s Bain Capital.

After having spent the previous four years working for a Boston-based property-casualty insurance company, I knew that the business of selling auto and home insurance was inefficient. Of the many opportunities here to cut costs, two were most glaring.

First, most auto and home insurance was sold by insurance companies through agents. For every dollar in insurance premiums that a person paid, about 20 cents went to agents’ commissions. According to the Insurance Information Institute, that figure had dropped to about 10.4 cents by 2013.

Second, while government mandated that people purchase insurance if they wanted to buy a car or home, rates for that insurance – and regulation of the industry more generally – were set through a process managed by regulators in each state, rather than a single federal regulator.

My pitch to Bain Capital was a simple solution, I thought – sell car and home insurance over the Internet. This would eliminate the need for consumers to pay the agent commission, and most of the savings could be passed on to consumers in the form of lower premiums.

Bain Capital was intrigued by the part of my presentation that highlighted the industry’s float – a concept well-promoted by Warren Buffett regarding the huge amount of capital that property/casualty insurers get from customers who pay for insurance well before any claims are paid.

But Bain Capital did not want to take the start-up risk that would be involved. In retrospect, I can see the wisdom in their decision. First, Bain Capital was primarily a financier of buyouts of large companies, and, second, building my idea into a real business would likely have taken a long time.

Just how long is clear from the Jan. 19 New York Times report on efforts by Google and WalMart to implement a version of the idea I pitched 20 years ago.

The property/casualty insurance industry is a huge pot of business opportunity. In 2013, premiums for auto, home and commercial insurance totaled $481 billion, of which $50 billion went for agent commissions.

In my mind, that $50 billion could be reduced to around zero. After all, if I buy a car, I know that I need to buy insurance. Why should 10% of my insurance premium go to pay someone who sells me that policy? Why not subtract that 10% from my insurance premium and let me buy the policy online after comparing vendors based on price and service quality?

It appears as though Google is trying to come to the rescue for consumers. Google operates a search engine for auto insurance prices called Google Compare. According to the Times, Google Compare “has been operating in Britain for two years, and Google is working on something similar for the U.S.”

Google can sell insurance in about half of the U.S. and has formed a partnership with an insurance comparison site. According to Forrester Research analyst Ellen Carney, Google is licensed to sell insurance “in about half of the states.”

Moreover, Google partnered with Compare, an American auto insurance comparison site owned by Britain’s Admiral Group, a car insurance company that has operated a European price-comparison site for more than 10 years. Through the joint venture, Google will access insurers in Compare network, the Times reports.

For the last 20 years, Allstate, which is the largest publicly traded property/casualty insurer and ranked third in the industry by sales in 2013, according to the National Association of Insurance Commissioners, has been doing pretty well. Since June 1993, its shares have risen 389%, and as of Jan. 19 they stood at a record $70.59.

People buy Allstate insurance through agents, which means that, if they could buy lower-priced insurance free of agent intervention while still getting good quality of service, the value proposition could cut into Allstate’s revenues.

But it remains to be seen whether Google will succeed. As I see it, Google Compare can generate significant revenues if it does the following:

  • Offers the same coverage at lower rates than rivals such as Allstate and others that sell through agents;
  • Delivers consistently excellent claims service; and
  • Generates enough public awareness of the superiority of its value proposition to induce consumers to overcome their emotional bonds with their agents to switch to Google’s insurance.

Google would be facing off against the likes of Geico in trying to convince people they can save money by buying directly from a company rather than through agents. Back when I was pitching Bain Capital, direct selling accounted for about 14% of industry revenue – but by 2012 that had risen to 28%, according to A.M. Best.

As a consumer I would love to see Google succeed in this quest. But given my experience trying to get financing to implement it, I would not be surprised if the golden chalice of low-priced auto and homeowners’ insurance sold online remains elusive for decades.

Has Auto Insurance Become a Commodity?

A boomerang kid lost his job and moved back home with his parents. While driving his mother’s car, he negligently struck another vehicle, causing several thousand dollars in property damage. The mother’s insurer denied the claim on the basis that the driver’s residency was not reported to the carrier within 30 days of his return home.

Fifteen minutes can save you 15%, anyone? Actually, the latest online ads say you can get a car insurance quote in only 7 ½ minutes.

Buying insurance may not be a pleasant task for most people, but neither is getting a root canal, and you wouldn’t choose a dentist based on how fast he or she can complete a procedure where your health is at stake. Yet consumers routinely risk everything they own and much of what they might earn in the coming years by choosing the fastest, lowest-cost insurance with the cleverest advertising campaign.

The denial of the boomerang kid’s claim arose from an exclusion in the insurer’s policy for accidents involving undisclosed household residents, unless the insurer had been notified within 30 days of the residency. What insured would think to report something like this to his or her auto insurer? If an “ISO-standard” policy had been in place, that wouldn’t be necessary.

At a rapidly accelerating rate via TV advertising, online “ease of use” promotion and proliferating media articles, consumers are being duped into believing that personal lines insurance is a commodity, with the only significant difference being price. Nothing could be further from the truth. While a lower price doesn’t necessarily imply lesser coverage, that is often the case.

In the words of sales legend Morty Seinfeld, “Cheap fabric and dim lighting. That’s how you move merchandise.”

What Does the Caution to Compare ‘Apples to Apples’ Really Mean?  (Hint: Nothing.)

Recently published studies by firms like McKinsey, A.M. Best, Nomura Equity Research and Gartner proclaim that auto insurance is now officially a commodity. Some of their conclusions predict the demise of the insurance agent, as the direct sales model wins the commodity war. Have any of these researchers ever read their own auto policies, much less compared the coverages in multiple policies?

The media perpetuate the myth. The typical “How to Save Money on Car Insurance” article cautions consumers to make sure they compare “apples to apples.” Translation: Make sure you’re getting quotes on premiums for the same liability, uninsured motorist and medical payments limits and physical damage deductibles. It’s as if broad coverage categories, limits and deductibles were the only differences between auto insurance policies.

A Wall Street Journal article, “Car Insurance Rate Shopping Can Pay Off,” says, “The Consumer Federation recommends consumers shop around to get quotes from insurers that don’t use agents, such as Amica Mutual Insurance and USAA (for families with military ties), and then ask an agent to beat the best price.” Not a word about any coverage differences—only the price.

More Proof That the ‘All Car Insurance Is the Same’ Mantra Is an Illusion

A Florida insured’s auto was in the shop, so she rented a car and later loaned it to someone, who loaned it to someone else, who had an at-fault accident that killed a child and seriously injured other children. The claim against the operator and named insured was denied by the insurance company on the premise that the vehicle was not a “temporary substitute” and that the operator was not a “permissive” user, as defined in this insurer’s personal auto policy.

The son of a friend of an agency owner was street racing when he crashed, seriously injuring himself and his passenger. The claim was denied by the insurance company based on its interpretation of its personal auto policy’s “racing” exclusion.

A church allowed a member to park his car in its heated “bus barn.” While exiting, he wrecked the car, causing structural damage to the building. The claim was denied by the insurer, citing the “care, custody or control” exclusion in the personal auto policy.

What do these claims have in common, other than denial from the insurance company? Each of them would have been covered if the policyholder had purchased an “ISO-standard” personal auto policy rather than the policy in question.

With regard to the Florida claim, the ISO personal auto policy defines “temporary substitute” and “permissive use” much less restrictively than the policy that was in force. The named insured might have saved 15% in 15 minutes when she purchased her auto policy, but it proved to be a bad deal when she had to take her claim to the Florida Supreme Court to recover. The Supreme Court did reverse the Court of Appeals ruling that favored the insurer, but the rationale was less about the policy language and more about Florida’s unusual dangerous instrumentality doctrine.

In the street racing example, the ISO personal auto policy excludes injury that arises from accidents that take place “inside a facility designed for racing,” while the auto policy in question excluded almost any racing activity, including on a public street. Fortunately, the father of the injured child had a Trusted Choice independent agent to aggressively advocate on his behalf by pointing out to the insurer that the exclusion applies only to organized racing activities, not impromptu street racing. More than a dozen coverage opinions from the Big “I” Virtual University Ask an Expert service supported the agent’s efforts. Do you think someone who purchased insurance online from “a guy in khakis” would enjoy the same advocacy?

Like the ISO personal auto policy, the “bus barn” claim also involved a “care, custody or control” exclusion. But the ISO policy makes an exception for damage to a private garage. The policy in question has no such exception—not to mention the fact it’s unlikely that the barn was actually in the driver’s care, custody or control. So both the policy itself and the insurer’s interpretation of the exclusion were faulty from the insured’s perspective—rendering the carrier’s slogan, “same coverage, better value,” untruthful.

12 More Nails in the Coffin of the ‘Insurance Is a Commodity’ Myth

Here are a dozen auto insurance exclusions or limitations you won’t find in the “ISO-standard” personal auto policy:

  1. Undisclosed household residents are excluded.  How many families have “boomerang” kids living at home whom they have not told their auto insurer about? An exclusion of this type was just recently added to the auto policy of one of the major TV advertisers.
  2. Business use of autos you don’t own is excluded.  Have you ever borrowed a neighbor’s car or made a business stop in a dealer loaner or rental auto?
  3. Business use of ANY auto is excluded.  Do you ever run to Staples or the post office on business for your employer?
  4. Use of ANY auto you don’t own is excluded.  Better not drive anyone’s car but your own.
  5. Vehicles weighing more than 10,000 pounds are excluded.  Have you ever rented a U-Haul truck or an RV for personal use thinking your liability coverage extended to the rental? With an “ISO standard” policy, it does; with some auto insurance policies, it doesn’t.
  6. Any type of delivery is excluded.  Denied claims include pizza, newspapers, Mary Kay cosmetics and, yes, even the delivery of insurance policies to customers by an agency producer. Google pizza delivery auto accidents and take a look at the catastrophic nature of some of them. Was that $50 you saved to buy a policy a good deal?
  7. Permissive users only get minimum limits.  This can apply to people who borrow your car or even unlisted household drivers.
  8. “Street racing” is excluded.  Google “street racing” and see how often people are killed or critically injured in the process. Does the auto policy covering your testosterone-fueled teenage son cover street racing? The “ISO standard” auto policy does.
  9. Criminal acts are excluded or limits reduced.  DUIs or even speeding tickets may preclude coverage.
  10. Medical payments only include licensed physician fees.  One insured incurred a $25,000 “life flight” helicopter fee that would not be covered, even in part, by a policy with this exclusion.
  11. Theft without evidence of forced entry is excluded.  One insured had a four-figure vehicle theft loss denied because he left his keys in the car. No such exclusion exists in the “ISO standard” personal auto policy.
  12. Sales tax is not covered under loss settlement.  This cost one “You get the SAME COVERAGE, often for less” insured more than $2,000 out of pocket for sales tax on a replacement auto.

Do you still believe what you’re told on the TV ads that the auto policy you’re getting a quote on is just like every other auto policy in the marketplace?

Accept the Challenge and Dispel the Myth

The differences between auto insurance policies are many, varied and potentially catastrophic. As insurance educator John Eubank, CPCU, ARM, says, “The bitterness of no coverage is remembered long after the sweetness of low price has been forgotten.”

Don’t be sold a bill of goods by TV advertising and consumer articles that state or imply that the only material difference between insurance policies is the price. It is time for insurance professionals to dispel this destructive myth. Innocent consumers experience catastrophic uninsured losses every day because they bought into the illusory proposition that their risk exposures can be identified and addressed cheaply and within 7 ½ to 15 minutes.

Failure to get this message to the consuming public is likely to lead to increasingly stripped-down insurance products that enable competitive pricing. Arm yourself with the information necessary to educate your clients, and bust the myth that insurance is a commodity.