Bill Wilson writes an excellent commentary about insurance. While Wilson’s discussion generally concerns what insurance product is sold and how it is sold, insurance coverage is always discussed. Wilson’s commentary reminds us that the heart of insurance sales and disputes is the depth and service of coverage afforded which transfers the financial risk of loss from the buyer to the seller insurance company.
In his recent commentary, The Comparative Rating Illusion—warning about the dangers of making insurance purchase decisions based on comparison pricing—he simply listed several cars and boats by brand with prices next to each and no other information other than the comparison price. Here is how he articulated the obvious problem of buying insurance this way:
Easy choices. I’ll buy that Ford and use it to tow my new Crest boat. After all, the only thing I need to know is the manufacturer and the price, right? Similarly, in the case of insurance comparative rating, all I need is the name of the “manufacturer” (aka insurance company) and the price (i.e., premium), correct?
Needless to say, NOBODY would buy a car or a boat with only the information provided above. Then why should consumers be expected to buy insurance sold that way? The answer to that question is easy…because we’ve conditioned them to believe that the only thing that matters is price. Any true insurance professional knows that, but apparently few insurance professionals make decisions for insurers when it comes to advertising.
Even in independent agencies, we are all too eager to simply plug some information into a comparative rating system, then tell the consumer which quote is the lowest, without any regard for which carrier, product and service is the best fit for their unique needs. If this practice continues, we might as well concede the industry to the startups (and entrenched carriers) that sell on price and/or convenience, as opposed to providing a real, professional service that helps consumers avoid catastrophic loss.
The bolded sentence in the quote is a fitting indictment by Bill Wilson of the leadership in some insurance companies who knowingly allow deception to obtain customers. The dishonest comparison of products and prices offered by its competitors is not appropriate to a product that is so important to the public.
I would suggest that many would consider it an unfair and deceptive practice known as “twisting” because this practice unfairly compares dissimilar insurance products. If Departments of Insurance enforced their laws and regulations, we might find this wrongful practice disappearing. Insurance company audit and compliance departments should take notice, even if their marketing officers seem to be stumbling over each other in a race to the bottom.
Thought For The Day
Competition creates better products, alliances create better companies.