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.

(Emphasis added)

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.
—Brian Graham

  • Thanks for the plug, Chip. Interesting comment about “twisting.” There is an insurer that advertises heavily and some of the catch-phrases they’ve used include, “Same Coverage, Better Price” and “You get the same coverage, often for less.” I’ve read their policy, including a recent significant reduction in some states. It is NOT the “same coverage” available from other insurers.

    In my state, our Unfair Trade Practices Law says:

    “Misrepresentations and False Advertising of Insurance Policies. Making, issuing, circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement, sales presentation, omission or comparison that…

    “Misrepresents the benefits, advantages, conditions or terms of any policy…

    “Uses any name or title of any policy or class of policies misrepresenting the true nature of the policy or class of policies…

    “False Information and Advertising Generally. Making, publishing, disseminating, circulating or placing before the public, or causing, directly or indirectly to be made, published disseminated, circulated, or placed before the public…an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance…that is untrue, deceptive or misleading….”

    So, is saying your policy provides the “same coverage” as everyone else when it really doesn’t an unfair trade practice? If the purpose of the law is to protect consumers from being mislead by misrepresentations to their detriment, there’s an argument that it is.

  • shirley heflin

    Dear Chip:

    Excellent discussion! The people that really fall prey to these “twisting” unfair and deceptive practices are people that are unfamiliar with insurance companies. Many go on the internet, compare quotes and buy the cheapest “coverage” with the cheapest carrier. They have no idea that this carrier is known in the policyholder industry as being an unfair and deceptive carrier; they don’t know that the carrier is going to put their interests ahead of theirs.

    The consumer could check with their State’s Department of Insurance to ascertain the track record of the insurance company with whom they’re considering. Educating themselves would save alot of heartache and money. Unfortunately, however, the average consumer gets their “insurance education” when they submit a valid claim and have to fight for the product they purchased.

    Tampa, FL

  • David Thompson

    Sadly, many consumes spend a lot more time researching the new TV set they will buy than the insurance policy they buy. As Bill states so well, it’s not just about the price when buying insurance.