Adjusting the Message, not the Volume

Canada’s insurance industry has initiated a number of ambitious, large-scale communications projects over the past few months, many of them based on the premise that communications are fundamentally flawed between the industry and the public.

The Insurance Bureau of Canada has done research showing most consumers have no idea what the basic concepts of insurance are. Many consumers don’t know whether or not their auto and homeowners’ coverage suits their needs. And clearly some consumers feel their experience resolving a claim is akin to that of visiting a foreign country.

IBC, to its credit, has launched a new public awareness campaign to help clarify some of the misconceptions people have about the insurance industry and its products.

Public regulators of the insurance industry, too, have expressed an interest in promoting healthy communication between the industry and consumers. As a result, regulators have placed a premium on communications and disclosure. Over the past two years, for example, insurance regulators have developed a new set of guidelines for insurers and brokers to use in disclosing the nature of their business to the public.

Without a doubt, the key point in all of this seems to be the necessity for consumers to better understand the industry. And there is never any fault in engaging consumers using public awareness campaigns. Arguably it’s better to have a failed public relations effort than no communication with the public at all.

But has any of the industry’s research delved into the quality of the present communications? What, for example, is the most effective vehicle for communications with the public? What is the best way to impart abstract — and often very technical — policy information? How do consumers wish to hear from their insurers/brokers, and at what frequency? And what would they like to know about their insurers/brokers?

One can make a big deal out of the fact that Average Joe on the street doesn’t know what the word “indemnity” means. But does Joe have to? Isn’t it more important for him to know whether or not his television set in the basement is covered for flooding under his tenant’s package? Isn’t it more important for him to know he should go ahead and fix the car he damaged in a fender-bender last week, because, contrary to what he believes, his auto insurance rates won’t go up if he decides to take advantage of the insurance product for which he pays?

In truth, there is a lot of gobbledygook that passes for communications and disclosure in this industry. Insurers are dismayed that consumers don’t read their policies, for example, but who can blame the consumers? Quite often it’s impossible to understand insurance policies written in pure legalese. Clearly even trained trial lawyers can’t understand the language used in policies, otherwise why would there be so many coverage disputes going to the courts and/or arbitration?

How is it possible, insurers might ask, that consumers do not know whether or not their basement floods are covered? Well, no doubt part of that is explained by simple consumer ignorance. Or could it be the fact that often policies contain so many exclusions and endorsements — often employing code words like “full” versus “replacement” value — that who knows what a policy truly covers?

In theory, regulators are correct in believing that disclosure might help the public make informed choices based on: (1) true knowledge of a carrier’s financial capacity for handling claims, and (2) knowledge of an insurer’s ownership relationship with the brokers that distribute their products to consumers.

But who can make sense out of the press releases insurers send out about their finances? Financial results should be disclosed to consumers using a clear, uncluttered form consistent across the industry (in the same way that Web pages have been standardized to include consistent features and functions familiar to all Internet users).All reports and policies for public consumption should use plain language.

Basic insurance concepts should be better explained in order for disclosure to be effective. What member of the public, for example, knows what a “combined ratio” means in the context of a figure in a financial report? And if consumers don’t know the difference between a broker, an agent and an insurer, will it truly make any difference whether the industry discloses these relationships or not?

In short, the industry needs to establish a better quality of — and not necessarily more — communications with the public in order to foster better relationships with the consumer.