Why are younger adults invisible to insurance companies?

The insurance industry values nothing quite so much as experience. Long resumes and longer relationships at companies with lifespans longer than us mere mortals are the norm. Similarly, our loss, retention, and payment experience with our customers form the bedrock for pricing and coverage options available to consumers.

Experience is a great teacher. Year after year, we roll out profitable and competitive products. Well, more profitable in some years than others, but overall, good. What’s the downside?

The downside is that if we only focus on experience, we’re looking at the past with blinders on. We can’t see anyone whose life doesn’t fit neatly in our datasets. And if our products don’t fit their lives, they can’t buy our products and they don’t end up in our datasets.

When we model all our products around the past, we miss the future. We’re missing out on protecting younger consumers earlier, when they first need protection, rather than later, when they buy assets that fit into our datasets.

Keeping the lessons of the past but also looking at how modern life is changing helps us serve customers best.

That’s what we do really well at Surround. We see customers who are invisible to other insurance companies. Their lifestyles are more modern than insurance industry data, so they are left unprotected.

We’re building for them.

Who are these unseen customers? Here are three examples:

Long term car renters

Younger people don’t buy assets as frequently as their parents did a generation ago. And even though the term “sharing and renting economy” sounds dated now, the way people access assets continues to change. (Read my co-founder Jonathon Grayson 's article on subscription car services here to learn more!)

One newer and growing service is longer term car rental subscriptions. Think Flexcar, SIXT+, and Finn. These can be month to month, or for a term of just a few months or longer. They are attractive in part because they don’t require going to the dealership to negotiate a lease or a purchase, and all the attendant work to get the car registered. And they come with a slick customer experience.

Insurance often isn’t included, so the customer needs to go buy it, or it’s included at limits that are lower than what a professional with a career and a future stream of earnings should have.

However, most insurance companies won’t write these cars. They are treated like rental cars from Hertz or Avis, instead of like a long term lease. The exposure, however, is much more similar to a long term lease. These generally aren’t vacationers driving in unfamiliar areas. These renters park these cars in their own driveways, or on their own street and use them to commute to a job and or run regular errands. And most of the time, there’s a stiff damage fee if the car is damaged.

Insurers, however, often have underwriting guidelines that prevent writing vehicles on shorter term leases. That makes some sense from a customer retention perspective. However, these insurers are also missing out on building early relationships with high quality customers, and it sure doesn’t get cheaper to attract them later. The long term rental services often have age, credit score, and driving record requirements before a customer gets the keys. Many have rent to own programs as well. These renters should be treated as an attractive acquisition play, not undesirable business.

(As a sidenote, we’ve also heard of astounding bad advice given by licensed reps to long term renters. No, these vehicles do not belong on a non owner auto policy, as usually written. Any vehicle regularly available to the insured needs to be listed on the policy, for both plain old car insurance and non owner auto. There are endorsements to add a regularly used vehicle to a non owner auto policy, but let’s get real, that’s not available to quote with most carriers.)

Non car owners who want an umbrella policy

This one is infuriating – what kind of customer is more preferred than one who is buying insurance they are not required to buy? And yet, as an industry, we make umbrella policies difficult for non car owners to buy.

Of course the biggest cause of umbrella losses is car accidents. And we all know that non owner auto policies are the right underlying policy for non car owners. Have you ever talked to these customers about actually trying to buy one, though? Some carriers won’t offer them to anyone who is not a current auto insurance customer. Others don’t offer limits high enough for an umbrella to attach. Sometimes sales staff are unfamiliar with how to quote non owner auto. Or sometimes, they simply don’t want to, because the tradeoff between time consuming quotes for the simpler products these customers need and their premium (and therefore commission) doesn’t make much sense.

There’s almost an almost general disbelief that someone could want an umbrella if they don’t live a traditional suburban lifestyle. Some of these customers tell us they feel dismissed before they ever get a quote.

Big loss for the carriers that turned them away. These are people who are likely to buy a whole lot more insurance over the years.

People who drive, but don’t own a car

The last two examples fit into this category, but they’re a small portion of it. There are many, many people who don’t need a non owner policy, but want one, to keep themselves safe when they rent or borrow a car.

As an industry, though, we’re so blinded by our assumption that non owner auto is for people who need SR-22s that we push non owner auto customers to nonstandard carriers, with lower limits, more punitive bill plans, extra fees, and a different sales process that isn't structured to truly assess their needs. How do we know this? Because we specialize in these customers, and have heard too many stories of being brushed off, blown off, and treated with disdain by others in the industry.

And these are the very people who are putting their hands up to show just how responsible they are.

Modern customers shouldn’t be invisible to insurers

At Surround, we have a strong and steadfast belief that everyone who wants to protect themselves deserves insurance. This means looking at the world as it is, and at consumers as they live their lives, and figuring out how to adjust our experience and our expectations to build profitable products for them.

As an industry, we can do better.

Kate Terry is Co-Founder and Chief Operating Officer at Surround Insurance. Most recently, she was a Senior Vice President, Commercial Product Management at Liberty Mutual Insurance and also held roles in Product Management at Progressive Insurance and Plymouth Rock Insurance.

Visit us at?Surround Insurance ?or text us at 617-206-1314. We’re happy to hear from you!