I led a trio of daily newspaper reporters covering insurance as their fulltime beat into the lion's den in Boston yesterday, moderating a panel discussion about the industry's poor reputation during the annual conference of the Property Casualty Insurers Association of America. Read on for the insights and keen advice they and many others at the meeting offered this reputationally challenged industry.
The panel felt like a focus group, only instead of the sponsors being comfortably separated from their critics by a one-way mirror, or watching the critique later on a video, the two groups were literally face to face.
I give a lot of credit to the journalists for flying up to deliver in person their frank assessments of the industry's communication shortcomings. But I also credit PCI for having the guts to convene the panel, since we all know the first step in solving a problem is admitting you have one.
Unfortunately, the room was only about half-full for our panel, when it was packed the day before when Rep. Barney Frank and Steve Forbes spoke. Perhaps that was because many snuck out to join the Boston Red Sox championship party as the team's victory parade passed right up the block from our Copley Square hotel.
More likely, however, the thinner turnout only goes to show that many in this industry are still in denial, unable to appreciate the impact of their poor public image on operations, the political climate and their bottom line. PCI and other groups still have a lot of educating to do to convince all of their members to make reputational risk management a priority, or suffer the consequences.
And consequences there are, as the three reporters who joined me on the podium were quick to point out.
Both Tom Zucco of the St. Petersburg Times and Becky Mowbray of the New Orleans Times-Picayune cited a "bunker mentality" on the part of insurers, noting how difficult it is to get anyone in authority to speak to them when catastrophes strike.
Ms. Mowbray noted "a big difference between the response of trade groups and individual companies," citing how the Insurance Information Institute was "a huge help in explaining the big picture," while top insurance company officials were too often nowhere to be found.
"Maybe that's by design," she speculated. "The insurers want the trade groups to take the hits, while it's really hard to reach the key people on claims, with everything they say vetted first by their attorneys."
Beatrice Garcia of the Miami Herald said it was "hit and miss" in getting insurers to comment, with the top dogs at smaller, local carriers far more accessible than CEOs and claims managers at the national giants. However, she also complained about "information from the insurers getting filtered through media relations," calling PR intervention "counterproductive. I want to speak with the actual people responsible."
She noted that during the Northridge earthquake in California, she interviewed the president of Fireman's Fund on his mobile phone as he drove through the devastated area, describing the damage he was encountering. "That kind of access and response is all too rare," she said.
All three noted that they are inundated with calls and e-mails from disgruntled and often desperate policyholders, who are either confused about their coverage or angry about a claim that's only partially paid or rejected outright.
"Readers ask us what to do, but we're not their insurers and we're not their attorneys," said Mr. Zucco. "But it shows how desperate people are for reliable information, which they are not getting from their carrier, their agent or their government much of the time."
The flight of carriers from a market devastated by a disaster doesn't do much to improve the industry's image, the reporters agreed.
"Those who get paid are grateful to their insurers, but many believe the insurance industry is making it very difficult for their communities to come back, as claims are not fully paid, carriers disappear from the market and rates soar," said Ms. Mowbray.
"What people feel about the industry is reflected by what they see on their bills," she added. "They see higher deductibles, higher premiums and less coverage, if they are offered a policy at all."
Mr. Zucco added that reader complaints about the industry spike after his newspaper published insurance company earning reports showing profits soaring while their coverage shrinks and premiums skyrocket.
The two Florida dailies represented on the panel tried to bridge the information gap by holding public forums and roundtables to bring together people from the community and the industry with regulators and political leaders. Both published edited versions of the discussion in their publications, with full versions appearing on their Web sites. They urged insurers to initiate more such public forums with local media after catastrophes strike to clear up confusion, give out information and explain the market impact.
"This provides an opportunity for the industry to get the word out, present its point of view and suggest possible solutions," said Ms. Garcia. "It's a chance for them to get their message out uncensored, instead of complaining about only getting a few sentences into a news story from a much longer interview."
The reporters also urged insurers to speak English, rather than confusing journalists and readers with technical jargon. "Most people hear the words 'actuarially sound' and they think you're talking about a body of water," said Mr. Zucco.
According to Ms. Garcia, "where the industry gets its biggest black eye is when mishandling claims. Word of mouth spreads fast on bad claims experiences."
One suggestion to enlighten the public was imbedding reporters with adjusters assessing claims in disaster areas, but the results of actually doing so were mixed--at least from the industry's viewpoint.
Ms. Garcia related some very positive experiences riding around with adjusters following the Northridge earthquake. But Ms. Mowbray noted that a colleague accompanying an adjuster on a Hurricane Katrina claim witnessed a policyholder break down in tears when told their loss was flood-related and therefore not covered by the carrier, and it turned out the insured did not have federal flood insurance, either.
However, the two agreed that going out on a number of adjusting calls would show the media and the public what the industry is up against working in a veritable war zone following a natural disaster.
The day before my panel, David A. Sampson, PCI’s president and CEO, meant to state his commitment to improving the industry's image during his first public address, but due to time constraints, the former deputy commerce secretary was forced to cut that section out.
That's really unfortunate, because Mr. Sampson seems to recognize the depth of the problem, and it would have been a powerful message to deliver to his membership. But at least PCI authorized the release of his full written remarks following the speech.
In his text, he called insurance a "misunderstood industry," adding that too many consumers “perceive the industry to be their enemy—an unresponsive monolith of corporate greed that is more concerned about profits than people.”
In his speech text, he said “this public perception is symptomatic of a growing wave of economic populism nationally and consumer opinion about the industry in many parts of the country, especially in coastal areas prone to natural disasters.” He cited the industry’s poor image in the aftermath of Hurricane Katrina as one major cause undermining insurer credibility with both the public and policymakers, and pledged to work to turn public perception around.
“I am not naïve enough to think the industry can wave a magic wand and convince the vast majority of the public to love us,” he wrote in his speech text. “But I do believe that by focusing on the fundamentals of our industry and through more effective communications with consumers and public policymakers, we can restore their trust in the industry and their respect for our contributions to personal safety and economic security.”
He conceded that “enhancing our public image and reputation will not be easy, nor will it occur overnight. But it is possible, and we must make this a priority for PCI and the industry.”
To be fair, besides convening this tough love panel of journalists, PCI has been fairly active in addressing the industry's image problem.
The day following my panel, their presiding chairman, Tom Tierney, the president and CEO of Vermont Mutual Insurance Group, noted in his report to the membership that the PCI board had "hired one of the nation's premiere pollsters, Frank Luntz, to conduct extensive public opinion research so that we could better understand why consumers felt they way they did and what action insurers could take to change public opinion and set the stage for an open and honest public policy debate over realistic long-term solutions to Florida's property insurance problems."
The research "identified several strategic initiatives in the areas of storm-proofing homes, encouraging market-based reforms to the state's regulatory system, and developing a limited federal role in financing catastrophe risks, all of which appealed to consumers," while "helping us learn how to explain the benefits of those initiatives to consumers that were free of industry jargon."
Following up with another study to show the dangers of the reforms the state had imposed, "the report served as the basis for a series of editorial boards that PCI staff conducted with major daily newspapers throughout the state, and helped restore the credibility of the industry in discussing how to rebalance Florida public policy."
Mr. Tierney added that "our industry's ability to be 'for' something was also noted as helping significantly. Such efforts have restored the industry's ability to challenge the governor and other political figures when their pronouncements are imprudent and do not protect consumers."
Mr. Luntz, chairman and CEO of Luntz, Maslansky Strategic Research, engaged PCI members on the industry's image for an hour the day before our panel, and didn't pull any punches.
"Insurance is about security and protection," he said. "But people perceive that the insurance industry is not only ignoring them, but is openly hostile to their needs."
He said that "if I had been running your message, I would have been running ads and having your top officials making personal appearances right after Katrina, to say you are there to help people recover and rebuild. Instead, most people felt you were abandoning them, avoiding them and running away from them." He added that "I would have had your top people all over Southern California" in the wake of the recent wildfires.
He noted that insurers "are so good at numbers, it's a shame you are not so good with words," advising carriers to "speak aspirationally. You are dealing with people when they are at their worst. You need to give them hope that whether it's their home or car or business that's been lost, you're going to help them make it better."
Emphasizing that "words matter," he asked: "Do you sound like a person or a corporation when you communicate with your policyholders?" Later, he lamented, "don't read me your mission statement, because that's corporate. I want to see your missionary zeal to help your customers."
Observing that "insurers are quiet about what they do, while lawyers are loud," he suggested that "this industry is too quiet. You need to get louder, to show you care about what you do and that you're passionate about doing it right."
So what lessons were the industry taught during the PCI conference--at least for those who were paying attention? Among the highlights:
--Managing reputational risk must be a part of the standard job description of every insurance company CEO, who--along with other key officials--must be accessible to the press and very visible at the scene of every major disaster.
--Public relations officials should serve more as booking agents to hook up reporters with company leaders to assure accountability and credibility, rather than merely be a conduit for pat statements that few pay attention to or believe.
--Insurers should more actively engage the press--and through them, the general public--by meeting with editorial boards and convening community forums to respond to questions and clear up confusion following a disaster.
--Insurers must do more than "just say no" to public policies they do not like or markets that are hit by disasters, proactively offering alternative solutions that involve more than merely hiking rates or abandoning troubled areas.
On the other hand, Mr. Luntz noted, insurers might be doomed to forever be unappreciated because of the nature of their business. "You sell a product to protect people against bad things happening to them, and only deal with them in a substantial way when something bad actually happens," he said. "That's a perfect storm. It's a wonder you aren't worse off when it comes to public perception."
Comments (11)
My second career was as a newspaper reporter, my third and present career is as an insurance agent. Having seen this issue from both sides, the insurance industry is terrible at PR.
It may be situational, as Mr. Luntz suggests, a perfect storm. However, since the media tends to cover bad news rather than good news, insurance executives who would be in disaster areas at claim time, even if claims aren't covered, would boost our image overall.
It also would not hurt our educational function for the public to learn that tears flow in the aftermath of a hurricane when people do not buy flood insurance.
It's hard to imagine how our reputation could get any worse by interfacing more often with the media.
Posted by Bob Owens | November 1, 2007 1:58 PM
Posted on November 1, 2007 13:58
Who could blame an insurance company employee for being reticent to speak to the press? Think about the legal challenges to what should have been a no-brainer--that flood is not a covered peril.
For good reasons, under company policies, most conversations with the media must be cleared through public relations or media relations departments, making instant feedback to and discussion with the media difficult.
Posted by Bill Brauer | November 1, 2007 2:30 PM
Posted on November 1, 2007 14:30
In your Oct. 15 NU column (a version of your Sept. 19 blog entry), you wrote about the problem of perceptions in insurance and how those perceptions become reality.
Many of these problems exist because we do not manage the expectations of our customers.
In insurance, customers and companies are drawing random samples from all possible losses.
Customers are usually dealing with one sample a year--most likely the sample is zero losses but occasionally they unfortunately have a loss. Insurance companies can aggregate all the losses from all their customers.
We are taught in school about calculating averages. If we are dealing with a bell curve or a symmetrical curve the average value is also the most likely value we would get in a random sample.
It doesn't matter how large or small the random sample size is. The average value of a sample of any size from a symmetrical curve will be close to the true population average value.
People are comfortable when thinking in terms of bell curves.
But in insurance, we deal with skewed distributions, and in this case the most likely value is much lower than the average value.
The average value of a small sample from a skewed distribution will be much lower than the true average of the total population. The majority of our customers will see something close to the lower most likely value.
Insurance companies that are aggregating all the losses into very large samples will be seeing the true average of the population.
In your editorial, the taxi driver was seeing the most likely value based on his relatively small sample of the population, while insurance companies are looking at the higher average.
He doesn't understand why the two results should be different because he is expecting them to be closely based on his understanding of results from bell curves. We're skewed.
What is the correct curve to use and what is the correct population average are difficult problems that insurance company representatives and regulators try to determine all the time.
Our customers, however, are seeing the results of small samples, which are probably always very close to zero.
And as the curves we work with get more highly skewed--for example, the annual number of hurricanes that hit Boca Raton each year--the difference between the most likely value and the long-term population average becomes bigger and bigger.
We have to try to make it easier for our customers to understand why there is this difference in perception.
Insurance companies exist to help our customers guard against the extreme unexpected financial consequences of life. As managers of insurance companies, we have to make sure that we are forecasting the true long-term results and acting appropriately to account for extreme events so that our companies will be there to pay the losses of our customers.
We have to avoid being misled by constant exposure to the lower most likely value of small random samples from skewed distributions.
These ideas are more fully developed in a paper that was published in the Casualty Actuarial Society 2007 Spring Forum. See:
http://www.casact.org/pubs/forum/07spforum/07Sp7.pdf
.
I have also submitted a smaller version of the paper to the Casualty Actuarial Society publication "Variance."
Posted by Kirk G. Fleming, FCAS | November 1, 2007 5:01 PM
Posted on November 1, 2007 17:01
At last my preaching on the soapbox might be falling on ears fitted with the Miracle Ear? Or at least the batteries on those so fitted have been replaced with ones that are not dead?
I sit and watch the lame commercials filling the airwaves here in San Diego from insurers following the devastating wildfires. Once again, where are the CEOs and the top guns of the industry?
We get actors and maybe some guy reading from a script that sounds so insincere that I want to hurl. Who's helping the neighbors of the insured? Come on...by doing what? Filling out their claim forms for another company?
Yapping about having a claims van on site is wonderful, as you wave the flag to a guy who doesn't have a TV and is sitting in a shelter somewhere with his family and all he owns in a cardboard box.
Did you send a team to every shelter? Why not tell them you have or will be doing that immediately, and have the CEO do the talking, and walk through the devastation to see first hand what loss means to a policyholder and the community.
Be more human and less of a cash machine in a tight-collared shirt!
It's time to get real. At least in Southern California, if there is any vestige remaining of the mentality that pervaded the last disaster in 2003, the hopes of any improvement in industry image will be lost forever.
It's time to help police ourselve. If you know another company is not doing what's right, blow the whistle for God's sake and quit the protectionism. That in itself will go a long ways towards restoring credibility with the public.
Their collective take is we're all thick as thieves, and when one company is bad, we're all bad. Let's be sure that doesn't happen this time around!
Posted by BJ | November 1, 2007 5:07 PM
Posted on November 1, 2007 17:07
Your NU column in the Oct. 22 edition (a version of your Sept. 26 blog entry, "Don't Gag Your Ambassadors"), is one I must agree with wholeheartedly.
As background, our family-owned agency is located in Central Florida just north of Tampa. Brooksville, Fla., in 1954 was known as "the hub of Central Florida," since it was 50 miles from everywhere--according to my father, Ed Browning.
Our agency marks 100 years this month, and our family has been associated through ownership now for 53 of those 100 years.
Ed Browning taught his sons to be active in the community and we certainly have been. We continue to be the local resource for the radio station when questions of insurance arise and the public appreciates that.
Being in Florida with its current climate make advocating for our industry doubly hard, but we still stand our ground.
When confronted with individuals taking insurance to task, we are ready to admit the industry shortcomings, but just as quick to point out there is no other industry so heavily regulated and held from its intended duties as the insurance industry.
I believe it is the only industry in Florida subject to "excess profits laws" and held to seemingly arbitrary standards when these "excess profits" are calcualted three-to-five years later!
With regularity I find opportunities to point out to customers and friends that the regulations should come down and relatively free-market conditions imposed so competition can dictate the price paid by the consumer.
Few are ready to do that.
What can be expected when our industry is represented by "Cave Men", "Quacking Ducks", and "Silly Lizards"?
If I had my way there would be sanctions on those in our industry who treat a serious contract with such frivolous images as mentioned above.
Then, when another commercial runs in our area showing troopers bailing out of a C130 transport and magically restoring a home destroyed by fire, it fuels the public perception that this magic is what our industry can perform.
This is unrealistic and a disservice to the consumer.
Yes, the industry needs to step up and defend itself from all ranks.
First, let's do some housekeeping and impose on our companies a request for realistic and helpful advertising instead of the junk we see today.
Shame on the companies for not having done it yet.
Thank you for this opportunity to vent and ramble. Hope some of my points are helpful.
Posted by Mark Browning | November 1, 2007 5:09 PM
Posted on November 1, 2007 17:09
Sam, three cheers to your editorial of Oct. 22 and blog entry of Sept. 26, "Don't Gag Your Ambassadors."
To sum up how strongly I agree with your message, you become a life-long policyholder when you can have a beer with your claim adjuster, when he is the center on my line and I am the right wing in a mens hockey league, when he gives you that 4 foot putt, etc.
It's amazing how much good information people can learn about coverage, gleemed by sitting in a locker room after a hockey game.
Non-agents who become active in the community can carry such a positive message within that community.
Yes , I have heard those bar-b-cue stories about the “claim gone bad.” You hear about the “one,” but not about the 1,000 done right.
Besides, the one gone bad was probably either not written correctly or there was unrealistic expectations of coverage when they did not pay for that coverage.
Insurance company people can be such great ambassadors for the industry within the community.
I sponsor football, hockey, basketball and all youth sports. It's people dealing with people and fulfilling the contractual promise.
People just like you and me.
Posted by M. Gregory | November 1, 2007 5:16 PM
Posted on November 1, 2007 17:16
As for your limo interaction en route to the Boca Raton Resort, noted in your Oct. 15 NU editorial and your Sept. 19 blog entry, "Reality Check," relating to the industry's reputation, your interaction with that cabby accurately sums up our industry’s perceived perception by the general public.
I am an independent insurance agency owner and a producer at the agency. We fight the perception of ‘fairness’ whenever we submit an insurance claim.
One individual chooses a $1,000 comprehensive deductible to lower their auto premiums, then unfortunately at windshield claim time, the glass company installer states that the insurer should pay for the windshield. The claimant complains it isn’t fair to pay a deductible--that’s what we pay premiums for.
Another family chooses a $5,000 health deductible to opt to cover major medical expenses at an affordable premium, but when they incur medical expenses below their deductible the insured blames the big bad insurance company for a policy that ‘covers nothing.’
Frankly, the problem is personal responsibility and owning up to the consequence of our individual choices and decisions.
If I opt to live on the coast (by choice--no one held a gun to my head), then part of my expected living expense is the higher insurance rates.
Too many insureds find it easier to cast blame in an attempt to make others responsible for their choices, rather than owning up to their decisions.
To counter our current negative public perception requires education and persistence.
The industry needs to educate the insured as to the very role of insurance and how it is accomplished--the transfer of risk.
The agent needs to educate the consumer as to what happens if they incur a covered loss with their chosen insurance plan and deductibles.
The old adage that you get what you pay for still rings true!
Posted by Jeff Munns | November 1, 2007 5:21 PM
Posted on November 1, 2007 17:21
Not only does the industry miss an opportunity to present a positive image in speaking up about what is right with the insurance business, but what sort of image is depicted when criticism of the industry is met by silence from the representatives of the industry.
In my case I would think that person had to agree with my negative assessment and was too embarrassed to say anything.
Our industry leaders sometimes are too smart for their own good--or maybe they know something we don’t. Maybe our industry does have too many dirty little secrets.
Why else would they be afraid of their employees speaking up?
Not because of a lawsuit, but because perhaps they won’t have the “pat” answer some yahoo in PR wants spread about?
Posted by John D. Hamilton | November 1, 2007 5:27 PM
Posted on November 1, 2007 17:27
I agree with your sentiments in your Oct. 15 NU editorial and your Sept. 19 blog entry, "Reality Check," and the need for the public to be educated.
But until the companies learn to communicate better with their agents, those backyard barbecue blowhards are going to be able to spout off, while we can do no more than to shrug our shoulders in return.
This is not because there is something we know, and can't say. It is because we really don't know the intent of the companies we represent.
Our industry has a reputation for doing cloak and dagger style business because that is how the companies out there want to be perceived.
If they were transparent in deed, and intent, they wouldn't be able to conduct themselves the way they do.
Posted by Jeff MacIntosh | November 1, 2007 5:31 PM
Posted on November 1, 2007 17:31
Excellent point on "Don't Gag Your Ambassadors," and I think it's much simpler and less risky
than opponents fear.
I often defend my industry in informal situations, without having to get into technical or confidentiality issues.
When natural disasters, or house fires, etc., come up in conversation, it's easy to remind others of the point that the news media persistently neglects--that it's a good thing insurance is there to help them rebuild.
I also respond to negativism toward insurance with reminders that the economy essentially couldn't run without it (businesses couldn't borrow money to build things), and most people couldn't buy homes without it
(because not many can do it without borrowing).
When it comes to hurricanes, it's simple to explain that we've had a 30-year lull, but now they're back to the levels they've been since the Civil War.
However, I do give one specific here--"our $40 million
branch can't afford a $200 million loss from a single storm." Something has to change, since hurricane patterns have changed.
When I hear that insurance companies make lots of money at the expense of little consumers, I remind them that every state has governmental departments charged with making sure the insurance industry does not make unreasonable profits.
In fact, with so many insurance companies competing for the same business, the industry actually profits less than
most other industries.
I just don't think it's as hard or risky as opponents express.
Posted by Jon Gammell | November 5, 2007 4:58 PM
Posted on November 5, 2007 16:58
I’ve been in insurance in upstate New York for a little over 19 years, and only the past 6 months of it in an independent insurance agency.
In the last six months, I've had more client (insured) contact than I’ve ever had, and it has been enlightening, to say the least.
It is frustrating that insurance is thought of in such a negative light so often.
I think insurers can do a better job of informing the general public of all of the good things they do and share more positive stories such as positive claims-paying situations and how much money is donated to charitable organizations.
I am confident that not many local people are aware how much we do in general.
I for one do not feel that the balance of the country or the federal government should subsidize lower rates for those who have chosen to live in sunny Florida or California. Maybe the states can fund a pool to help soften the impact on insurers.
Perhaps carriers should also release some more detailed numbers for the insureds in catastrophe-prone areas, showing them how long it takes a carrier to recover billions of loss dollars when major storms or fires ensue.
The complexity of our business, given litigation, antiquated laws, fraud, etc., are difficult to convey to a population largely not very knowledgeable about insurance in general.
Posted by Sean Leary, CIC | November 9, 2007 5:20 PM
Posted on November 9, 2007 17:20