The perception of our industry

“The whole insurance industry is inherently corrupt and dishonest; their policy is to deny, delay and defend.”

“Insurance companies try to wear people down by dragging their feet to the point where policyholders would take whatever they are offered, regardless of the fair value of a settlement”.

These are the views of a New Zealand policyholder and stem from his mistreatment from a Christchurch based life insurer. This is unquestionably a very real occurrence, and represents the very worst of the treatment handed out by our industry but I know that it doesn’t represent the norm. I performed a Google search for Dishonest Insurers and Insurance Companies and I had to wade down to page 5 of the search results to get the first account of a dishonest insurer, thereafter the next account appeared on page 9 of the same search and thereafter the references where these views were expressed remain consistently as infrequent.

I realise Google is not the final or conclusive word on whether the industry is dishonest and I’m sure there have been instances where insurers have acted in filthy, greedy, unethical and self-serving ways. My view is these unscrupulous individuals should share a special jail cell with corrupt politicians and Idols judges. That said once these few scumsters have been served with the harshest criminal punishments I truly think the type of systematic dishonesty as described by the comments above are rare and occur far less frequently than what is generally perceived.

Most people I meet from our industry are hardworking, straight talking, honest and principled people. I also often hear claims administrators, legal representatives and senior managers from the industry stating their default to a position and intention is to pay every valid claim and only to repudiate claims that are certainly fraudulent or misrepresented. I know this sentiment is sincere and true and the view of every big insurer.

So why is there a widely held perception of systematic dishonesty in the industry? We are honest and trustworthy as are the people I know from the industry, so why do people sometimes raise an eyebrow and make snide remarks about insurers’ opportunism and our tendency to use fine print to avoid paying claims. I’m all for a bit of teasing but the frequency with which these jibes are made makes me angry as they portray a false state of our industry and 99.9% of the people who work in it.

I think this false sense of the industry is caused by the nature of the fact that when insurers or their representatives are bad they are very bad and can be the cause of devastating consequences as experienced by the victims of their fraud. The unscrupulous and heinous acts of the few may contribute to the perception that these acts of fraud and crime occur more frequently than they do.

I also think that the complexity of some policies prevent the policyholder from ever fully understanding the cover and when a claim arises that is not legitimately covered under the policy and it results in a claim being rejected, it can sometimes lead to the perception that the insurer is reneging on what was perceived by the policyholder to be the agreement. Here insurers need to take responsibility for their own bad reputation as they should do their best to ensure every individual insured understands the cover benefits, terms and conditions. Greater effort needs to take place in this regard.
Furthermore there are incidences of sophisticated misrepresentation by policyholders that have required insurers to be more vigilant in assessing the legitimacy of the claims they receive. This insurer vigilance is unfortunately often perceived by policyholders as insurers once again trying to shirk their obligations and trying to find reasons not to pay claims.

As an industry I think we are our own worst enemy and it is our responsibility to deal with our reputation of being perceived as less than honest. I believe the way we can do this is through realising these causes and taking greater responsibility for improved communication to overcome them. For example even if the vast majority don’t ever read their policy document and the few that do normally only do so when a claim arises. Insurers should take responsibility of this and offer other ways of communicating the contents of the policy document.

Our policyholder communication needs a radical overhaul: This starts with policy wording and design being formulated to emphasise benefits and restrictions in a clear and concise manner that can be easily understood by every policyholder not only the most educated. I’ve never heard any policyholder complaining that the benefits, terms and conditions are set out in a manner that is too easy to understand, so we shouldn’t be concerned that we won’t sound smart enough if the wording is in plain and simple language.

Salespeople that overpromise and mislead customers as to a policy’s benefits cause massive damage to the reputation of the industry. Despite every insurer monitoring and policing in an attempt to stamp out these malpractices and take strict action against individuals that are found guilty of misleading policyholders. It is believed this dishonesty will continue as long as salespeople receive an income only based on sales volumes and do receive at least half of their income based on policyholder customer satisfaction measures.

Policyholder administration can also improve its communication by issuing policy support material that enables the policy to be better understood at policy inception and policy education should take place continuously thereafter.

Finally I think every person employed in whatever capacity in the industry should use every opportunity to illustrate their integrity and not to tolerate jibes about the industry’s ethics. We are by and large a trustworthy industry that I believe wants to provide an important service in a straight forward and transparent way.