Why Nobody Trusts Insurance: How To Remake It Into A Product Customers Love

First of all a Big Thank You for your comments and likes; those are gold nuggets and I really appreciate and treasure them. Having seen a very encouraging engagement and dialog on the first two insurance posts, in today’s post I’d like to continue the dialog by getting under the skin of insurance, per se, by taking a closer look at fundamentals of insurance products.

OK thou shall start by apologizing for the generalization I've made in the title of this post: of course to every rule there are exceptions but I’m sure most of us have either seen or experienced the level of societal mistrust in insurance. Imagine you are at a party talking to a group of people you’ve just met, and all of a sudden a question of what does everyone do comes up. When a turn comes for the person working in insurance, everyone kinda cringes and awkwardly moves on. Here are the types of headlines that briefly flash through everyone’s mind as they hear word “insurance”:

Those are just few titles you get when you google “insurance” and most of people do associate insurance with an untrustworthy product .. rather unfortunate, isn’t it for a concept that meant to provide good underpinning social fabric akin to hospitals.

So how did insurance which started off as a concept meant to provide financial safety net ended up being something less: a collection of financial butterfly nets? Good question! Let’s try to understand it by taking a look at the insurance product that you want to buy vs. the one that you actually end up buying and how this disconnect translates into the awkward situations at parties ;)

Insurance that you want to buy

• Broad coverage against life’s adversities;
• Transparent, quick and fair payments;
• Good value that makes you feel like you are getting your money’s worth;
• Easy to understand coverage so that you don’t need a Legal degree to understand;
• A tiny bit of empathy, please: “I’m a person and sh*t occasionally happens to me”

Insurance that you get sold

• Highly defined risks coverage that only covers select risks;
• Extra thorough “no rush” claim investigation to ensure you don’t fall outside coverage, are not double-dipping (if you have two insurance policies) and are not committing fraud;
• 45% of value going towards servicing, sales and insurer profit;
• Policy coverage details defined by insurance underwriters (risk selection) so that Claims professionals (loss evaluation) can evaluate loss against and if necessary stand in court. Hence, a very detailed legal oriented language.
• Cold treatment: “Took on Risk and Experiencing an Adverse Event”

It’s not hard to see how different those two products are and hence my butterfly net vs. safety net analogy earlier. Unfortunately, I believe that this fundamental misalignment between what consumers want and get, is the root cause of the loss of Trust in insurance. Further aggravating the matters, in insurance there’s a delay between buying and using it which can span a few months or even years. It’s as if you bought a fire extinguisher and two years later when there’s a real fire and you are trying to put it out you discover to your shock that instructions indicates that extinguisher uses water which puts out only certain types of fires and unfortunately yours is an electric fire … big ouch and who could blame you for bad mouthing the company who sold it to you.

By now you might be thinking that I dislike insurance. Let me pre-empt you and tell you that in-fact its the exact opposite. I work in insurance and am really passionate about what I’m doing. I believe that despite its current shortcomings, which there are many, there is still the fundamental good that insurance brings to society by providing an abundance of butterfly nets and water extinguishers, managing to help sizable number of people and businesses. The reason why I’m sparking this dialog is because I believe we, as an industry, got caught up in some conflicting objectives and are not bringing the extent of good that insurance is truly capable of.  I will be part of fixing it and unlocking customer trust so that communities can be further empowered through insurance and resulting broader safety nets.  

Hopefully by now the picture of why Trust so fundamental to Insurance is starting to form in your mind. According to the dictionary Trust a “firm belief in the reliability, truth, ability, or strength of someone or something.” and a Promise is “a declaration or assurance that one will do a particular thing or that a particular thing will happen.”

From this it’s clear that Insurance is a promise of financial help when an unfortunate happens. The customer pays their insurance premiums in exchange for this promise, trusting that insurer will be there to help when specific things that they’ve agreed to cover, happens. Hence promise and trust are two inseparable elements underpinning insurance. Start losing trust and insurance promise becomes worth a lot less…  you’ll need to work double hard and employ sophisticated sales people to help convince customers that the promise can still be trusted and the promise is covering the right things.

Tricky, ain’t it? :) and this brings us back to the discussion we had last week about insurance distribution and how it might have contributed to getting us into the current situation. As we dig deeper, it will become more apparent how tangled up this really is and will hopefully will also start to give us hints as to the way to start untangling it.

Now that we did justice to some of the fundamentals of insurance products, I already did give you a hint in the beginning of this post as to the best way to start thinking of the vision of a product that nails the customer needs. Together with some magic pixie dust it may open up another interesting possibility of insurance going viral (nobody said that one can't dream). 

Following are some tangible changes to start bringing about insurance revolution:

Thanks for reading and most importantly, I would like to hear your thoughts about insurance products that could be designed from ground up and customers would fall in love with!

Till next time,
George

ABOUT THE AUTHOR:

George Kesselman is a highly experienced global insurance executive with a strong track record of roll-up-the-sleeves-and-get-tough-sh*t-done-together leadership across both emerging and matured Asia. George’s relentless pursuit is to transform insurance by leading creation of an industry-wide innovation ecosystem in Singapore. The ecosystem that will effectively attract, cultivate and rapidly scale entrepreneurial ideas in insurance and ultimately contribute to the next wave of global revolution in insurance!