A View From The Press Box

Sam, you were right, it just ain't funny.

Try explaining to a customer with the residual Florida homeowners market (Citizens) why it isn't a ripoff to be charged $5,000 for windstorm insurance on their $350,000 home.

They don't believe it when I tell them there are lots of exclusions and limitations; or, no, the price isn't gouging--it is the true cost of risk in "hurricane country" and, if they think it's gouging, they should take it up with one of the company owners: Them! They are "citizens" and own the government-run market!

They generally don't believe me, refuse to verify my statement and think I'm just making excuses so I can make millions from them (the commission is 6.4% on a homeowners policy and 11% on windstorm).

This atmosphere of bad reputation is further enhanced by our fine governor, Charlie Crist, who says that no insurance company should make a profit from a property owner in Florida.

Not funny...

SAM RESPONDS:

Interestingly, Gov. Crist endorsed John McCain in the Republican primary, even though the senator does not appear to favor the state's pet public policy project--setting up a national catastrophe fund to back up state facilities like Florida's; and dissed Mr. G of NYC, who repeatedly pledged to push for the cat fund if sent to the White House.

Let's not skirt the issue: insurance agents are salespeople. The companies that these salespeople represent are (usually) profit-seeking, publicly-traded corporations.

Attacking corporations for seeking to maximize profit is nothing new, and many times those attacks are well substantiated against firms that lack a compass (other than share price) to guide their operations.

Putting aside attacks on corporate entities, let's make fun of sales people.

"How do you tell a salesperson is lying?...His lips are moving."

Laugh though you might, when was the last time you truthfully told the car dealer how much money you were prepared to spend before you purchased a vehicle? Prospects lie and evade far more often than salespeople, from my experience.

Not to let salespeople off the hook, however. The last time I bought shares of a money market mutual fund, the registered rep literally guaranteed me that the shares' value would never go down. Unlikely as it would be, even relatively lower-risk securities still carry risk.

So what do many prospects, salespeople and corporations lack?

How about an upfront contract that requires honesty, integrity and commitment from all parties involved?

How about a standard operating procedure that seeks not to maximize profit or minimize cost, but creates the most value for all adherents?

A "not so funny" reminder of the insurance industry's reputation......KATRINA.

My spouse is a nurse, so we see lots of the jokes about medical coverage, which seems to rate on a close par with P&C coverages, according to public opinion.

A bit off-color, but there is the cartoon with the nurse coming in to the patient's room with boxing gloves on and telling him that his medical insurance plan doesn't cover enemas, so she'll have to knock the crap outta him!

Or the cartoon where the nurse holds the drooling cat over the patient and explains that since he has the basic medical plan, this is the the only "cat scan" he's going to get.

Granted, these are only jokes, but again, they dig at the heart of the industry as a whole.

Of course, in the above examples, it does point out that you get what you pay for. Maybe if the P&C industry used similar advertising showing that if you insured your 2006 home like a 1950's bungalow, you'd be rewarded with a replacement 1950's bungalow-style home in the event of a total loss.

Or if you cheaped out on coverage for your 60K 2008 Cadillac Escalade, it could be replaced by a Chevy Tahoe.

Maybe that type advertising would hit home with the consumers?

How about a judge in Riverside County, Calif., who dismissed a criminal case of insurance fraud because "an insurance company cannot be a victim."

I have a cartoon that has a customer asking his insurance agent for "as much fire insurance as I can buy by Friday night."

A book of more than 80 stories showing how insurance fraud is attempted (which I wrote, called, "Heads I Win, Tails You Lose," available at http://www.lulu.com as an e-book)--all of which, whether the insurance fraud perpetrator was caught or not, resulted in a loss to the insurer.

Just this morning I was talking to a pal of mine at the train station, and in the course of a conversation about insurance coverage for accidents caused by drunk drivers (don't ask), he said:

"I do a lot of work for insurance companies and, believe me, if they can avoid paying a claim, they will."

No mention as to the relative merits of the claim. Those insurance companies DO NOT PAY!

From time to time, I have been asked, “Why don’t insurance companies refund homeowners or auto premiums when a customer has no losses?”

The general public forgets that insurance is a pooling arrangement. An individual “trades” the certainty of a small loss for the uncertainty of a large loss. (In essence, the losses of a few are paid for by the premiums of many.)

What the customer has purchased is the insurance company’s promise to perform if/when a loss occurs.

Property owners would not expect the fire department to return a portion of their taxes because they did not have a fire. Nor would they expect the police department to refund tax dollars if they were not a victim of a crime.

People who purchased an extended warranty for an appliance would not expect a refund if it continued to work.

If we can keep the concept simple, a reasonable person would accept our rationale.

The $20,000 Pyramid players are a large part of the problem. They want to know what is "Something you continuously pay for but never get anything in return?"

I have been paying for homeowners insurance for 40 years. I have never suffered a claim. What I HAVE collected is 40 years of peace of mind.

Barry Zalma posts on 1/28 that "THOSE INSURANCE COMPANIES DO NOT PAY." I do not know if that is Barry or his friend, Jim speaking, but have rarely seen such an uninformed statement.

My final comment (for now) is Brandon's post of 1/28--"A 'not so funny' reminder of the insurance industry's reputation...........KATRINA.

A couple of small screw-ups and I guess we are going to live with that forever. Seriously, when all is said and done, the insurance industry is going to righteously prevail in 97.5 percent of the claims.

Of the remaining 2.5 percent, 1 percent will be abandoned and the insurance industry found at some fault for the remaining 1.5 percent. I wish the American auto industry had quality control to match those figures!!

Of all of the comments made, I am surprised that no one has mentioned the Allstate fiasco that is occurring in Missouri. When the public is led to believe that there is a business process to deny claims, we are all painted with the same broad brush.

I have dealt with two major players in our industry where my only fault in the claim was my presence so their insured could run into the back of my car. Both companies tried to tell me that I was 20 percent at fault for being present.

When I asked if they wanted a bad-faith proceeding, both paid in full with no further issues. The public is not aware of how to handle this, so they get abused and so does our reputation.

If we want to repair our reputation, we will have to put relentless pressure on these malfeasants and correct the abuses.

Having a 40-year history in the insurance claims industry, I am beginning to see a disturbing "trend" in the manner claims are paid by the industry.

Be it a lack of training of the claims adjuster, or "conservative" claims-handling guidelines set by management, policy language appears to be interpreted by individual claims handlers rather than depending upon industrywide guidelines like the FC&S Bulletins.

As a result, I have seen a denial of claims by providing as a basis of that denial exclusionary language offered under another coverage, perhaps on the same page, etc. Even more disturbing is that some department of insurance examiners don't know the difference!