Transparency will come one way or another
Consumer Reports recently published a scathing exposé of personal auto insurers, which Bloomberg summarized with this headline: “Risky Borrowers May Be Treated Worse Than Drunks by Insurers”. The industry is coming under fire for using credit information to price personal auto insurance policies. But, as Robert Hartwig, president of the Insurance Information Institute noted in an interview for Bloomberg, “The fact that insurance-based credit scores are an important part of setting rates is nothing new. It is strongly predictive of loss, and that’s a net benefit to consumers.”
Hartwig is making the important point that it’s an insurer’s job to use proven, credible ways to identify which policyholders are more or less risky and charge accordingly. The entire notion of shared risk requires insurers to make these determinations with the best information available. Who among us would take on the liability of owning a car, a home, or starting a business if we didn’t have the insurance safety net? One bad car accident could wipe us out financially.
I could go on defending insurance and listing the multitudes of other industries that use similar information to assess, segment and target their customers. But that would be missing the point. In today’s information-at-your-fingertips world, insurers have lagged behind in terms of modernizing their customer experience – which includes a healthy, if uncomfortable dose, of transparency.
Gone are the days when a company controls the information a customer has about their products, pricing, and service record. The reality is that how you run your business, price your products, and treat your customers is publicly available 24/7. Granted the information consumers post online isn’t always accurate, but insurance could do a much better job at building consumer relationships. According to an Ernst & Young study, consumer trust for insurance companies is lower than other industries, with 57% of consumers reporting dissatisfaction with the lack of interaction and proactive communication from insurers.
If insurers aren’t having conversations and engaging their customers, then the industry is letting its reputation be defined by others, and studies show that your customers are more likely to share a bad experience than a good one. Investigations, like the one from Consumer Reports, are much more likely to target those industries that don’t engender consumer trust. There’s nothing fundamentally wrong about auto insurers having tested all types of information to find what is most predictive of loss. It’s not dissimilar to how online retailers collect our information as we surf the web to serve up relevant products and offers, or apps that track our behavior at increasing rates. Insurers have an opportunity to step up efforts to create a real dialogue with consumers in order to start building trust. If they don’t, they will continue to be an easy target for criticism and complaints.
ABOUT THE AUTHOR:
Kirstin Marr is the chief brand advocate for Valen Analytics, paving the way for prospective clients to lead the innovation initiatives required to compete in today’s marketplace. She has a passion for building companies that invent leading-edge technologies to improve customers’ lives and solve the inefficiencies that exist in many traditional marketplaces. Kirstin also has a long-standing commitment to philanthropy and community leadership. She was most recently Board President for Colorado MESA, a non-profit that serves underrepresented and economically disadvantaged students to graduate from college and successfully pursue careers in Science, Technology, Engineering and Mathematics (STEM). She also co-founded a non-profit to benefit the Teen Lounge at Children’s Hospital Colorado.