Happy New Year 2015 (and Insurance Shopping)

2015

Out with the old and in with the new.  Welcome to 2015.

Speaking of new, there are undoubtedly a large number of new insurance policies issued with January 1, 2015 effective dates for which terrorism insurance coverage has been scaled back or eliminated after the U.S. Senate failed to extend the Terrorism Risk Insurance Act (TRIA) before the holiday recess.  Conventional wisdom suggests that this matter will be taken up anew in the first few days of the new Congress.  Risk managers and insurance carriers both hope that proves to be true.

And now for something completely different… (with apologies to Monty Python’s Flying Circus for borrowing their title/catchphrase)

There is something about the turning of the calendar to a new year that just naturally causes the human species to ponder random subjects and of course, resolve to make changes.  Lately, while enjoying time with family and friends (and way too much food), I have been wondering about how typical consumers make insurance purchase decisions.  Weird, I know.

Insurance is not like most other consumer products such as televisions, appliances, clothing, and restaurant meals.  For those types of purchases, consumers generally get a little but excited and willingly research the attributes of various competing products.  Comparisons of features are matched with the consumer’s personal values and desires, and ultimately the consumer chooses the product that best suits their needs for the best price (i.e., value).  Why should insurance be any different?

Well, for starters, I don’t know anyone who gets excited about purchasing insurance.  I also don’t know anyone who has done much more than high-level product research and comparison of insurance products save for one attribute:  PRICE.  For most insurance consumers, it all comes down to price and they turn a blind eye to the differences in insurance coverage between competing insurance companies.  To be fair, it’s not easy for the average consumer to make such comparisons because the insurance contract isn’t delivered to the consumer until after purchase.  And even then, reading and understanding the nuances of insurance contract language is not for the faint of heart.  Furthermore, standard insurance policy forms are often used by insurance carriers thereby giving the impression that all insurance policies are identical, despite that fact that individual carriers do tweak their insurance contracts.

So the industry tends to fall back on nifty marketing gimmicks to differentiate themselves (e.g., vanishing deductibles, new car replacement, etc.) and as always – service.  Each carrier wants the consumer to believe that no one can provide policy and claims service better than they can.  What it all boils down to is whether or not consumers can make rational insurance purchase decisions in the current insurance marketplace?  If comparing insurance coverage attributes is really that difficult, then what is the consumer left with to base their purchase decision on other than price?

I smell a research project brewing here…  Happy 2015!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s