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July 5, 2017

Why the Public Hates the Insurance Industry

Summary:

People see our industry as a parasite on the economy. Why? Because insurers sometimes make incredibly insensitive decisions.

Photo Courtesy of Pixabay

I don’t ordinarily blog about my opinions, but permit me to depart from tradition today. I recently received a phone call from an IIABNY member (an agent whom I will keep anonymous) that still bothers me.

The agent told me that he had a homeowners insurance policy covering a husband and wife. Recently, the husband died. At the widow’s request, the agency sent a change request to the insurance company (which will also remain anonymous), asking it to remove the deceased husband’s name from the policy. The company issued an endorsement to the policy, along with a bill for an additional $26 in premium. Like any good agent, our member called the company to ask why the widow was being charged $26 for taking her late husband’s name off the policy. The answer: The company ran a check on her credit score and found that it was not as good as her husband’s. Under the company’s pricing system, this knowledge generated a higher premium.

See also: Healthcare Needs a Data Checkup  

This insurance company charged a new widow $26 because she was more of a credit risk now that her husband was gone.

Please take a moment to reflect on the coldness of that decision.

Now, I understand how this probably happened: The request came in, the insurer’s computer system automatically ran a credit check, read the new score and issued the endorsement/bill. Insurance companies, which like to moan and groan about how auto insurance has become a commodity, now treat it like a commodity that comes off a production line with as little human involvement as possible. This process is more efficient than having underwriters review most accounts. The process also produces atrocious outcomes like this one.

The American public does not have a high opinion of the insurance industry. People we interact with may like us individually, but they think our industry as a whole is a parasite, sucking gobs of ill-gained money from the economy. And why do they think that way? Because insurers pull crap like this.

There are so many good people in the insurance industry. You and I meet them every day — agents and brokers who spend hours lining up quotes for appropriate coverage at fair prices. Claims people who work 16-hour days for weeks after a natural disaster, trying to get claim checks out to their insureds as fast as possible. Underwriters who struggle to arrive at prices high enough to please their employers and low enough to please their agents. Loss control engineers who spend long hours with clients to make workplaces safer. Thousands of people who show up for work every morning wanting to earn their paychecks fairly and who do the right thing for their customers. I could go on and on.

And all that effort and all those good intentions get washed away in the public’s mind when an insurer pulls an insensitive, stupid act like this. If this were an isolated incident, we could explain it away, but we all know that it’s not. Things like this happen all too frequently. No doubt the insurer’s employees will say that the system did it. Maybe so.

You know what?

I don’t care.

People program computer systems. People can override them. People who are paying attention can stop something like this from going out the door in the first place. Or they can charge a woman $26 because her husband died. If it were you, which action would you like to go home and tell your family about?

See also: A Way to Reduce Healthcare Costs  

The IIABNY member who called me asked me to research New York insurance law to see if there is any basis for telling the insurer that this action was illegal. I truly hope I find one. The agent did not tell the woman why her premium went up, but she paid it. I guess she felt it was the right thing to do.

Too bad her trusted insurance company doesn’t have that same sense of honor.

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About the Author

Timothy D. Dodge, AU, ARM, CPCU, is the assistant vice president of research for Independent Insurance Agents & Brokers of New York, based in Dewitt, NY. Dodge is responsible for answering members’ questions about insurance technical, legal, regulatory and legislative matters and for all communications with the media.

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