23 August 2013

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

insurance“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 insurance policyholder. This stems from his mistreatment from a Christchurch based life insurer. This is unquestionably a very real occurrence. It represents the very worst of the treatment handed out by our industry. 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. The next account appeared on page 9 of the same search. The references expressing these views consistently remain infrequent.

I realise Google is not the final or conclusive word on whether the insurance industry is dishonest. 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. I believe that systematic dishonesty occurs rarely and happens far less frequently than what is generally perceived. Once the harshest criminal punishments are served to these few scumsters.

Most people I meet from the insurance industry are hardworking, straight talking, honest and principled people. I also often hear claims administrators, legal representatives and senior managers from the insurance 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 do people widely hold a perception of systematic dishonesty in the insurance 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 strongly support occasional teasing, but the frequent occurrence of these jabs angers me because they falsely portray our industry and the 99.9% of 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 fully understanding the cover. When a claim is rejected, it can lead to the perception that the insurer is being dishonest. Insurers need to take responsibility for their own bad reputation. They should do their best to ensure every individual 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. Unfortunately, policyholders often perceive this insurer vigilance as insurers once again attempting to shirk their obligations and actively searching for reasons to deny claim payments.

We are our own worst enemy as an industry. Addressing the perception of being seen as less than honest is our responsibility. 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 begins by ensuring that policy wording is clear and concise, making it easily understandable by every policyholder. Not only the most educated. I have never heard any policyholder complain that the benefits are explained in a manner that is too easy to understand. 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 taking strict action against individuals found guilty of misleading policyholders, these malpractices still persist. If salespeople receive an income solely based on sales volumes, dishonesty will continue. As well as if half of their income is based on policyholder customer satisfaction measures.

Policyholder administration can also improve its communication by issuing policy support material. This enables policyholders to better understand the policy at its inception. 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.


The information contained in this communication, including attachments, is not to be construed as advice in terms of the Financial Advisory and Intermediary Services Act of 2002 (“FAIS”) as the writer is neither an appointed representative of Zestlife, nor a licensed financial services provider as contemplated in FAIS. Please consult your Financial Adviser or Zestlife should you require advice of a financial nature and/or intermediary services.