I am SUCH a huge insurance nerd, so THANK YOU for this article and those to come! I'm so excited to read more :)
Now this is my take from Canada, so I'm sure it's very different in the US, but I wanted to share my northern view. :)
"If the carrier covered every potential claim that came through the door then there would be no carrier."
True, if the underwriters aren't correctly assessing the risk that walks through the door. I would say that my team likely covers 95% of the claims that come to us. Why? Because our underwriters are very good at assessing risk, so most of our insureds never make a claim. And when they do, their brokers are educated enough to get their notice to carrier right. Sometimes they throw the spaghetti at the wall, but the brokers are pretty good about accepting the denial as reasonable.
Do you know what volume of coverage litigation occurs in the US? I don't, nor do I really know how much there is up here except for on my team. I'd love to find out. For my team, we've had four coverage claims that I know of in two years, and we've not lost any. I wonder how many are successful in the US - if it's a high percentage, then that would bolster your point.
"Carriers have to strike a delicate balance between paying claims they want and avoiding claims they don’t want."
I'd like to clarify that we "don't want" claims that the policy doesn't cover. :) I know there are some really awful, rotten, no good insurers out there with denial quotas that truly harm their clients. But there are other companies which truly want to service their insureds and give them what they paid for. The key is figuring out which is which and pointing your clients in that direction.
This brings up an important point - neoliberal capitalism creates a marketplace of individual greed. As you said, policyholders are incentivized to get as much as they can from their policies, as are insurers to give out as little as possible. I think it is this BELIEF about insurance that only makes both sides more polarized. Insureds believe the company will be out to screw them over, and insurers come to believe that the insureds are doing the same. And then these beliefs cause an even greater divide between the two sides, making things worse, as you say. And I agree, this is really hurting our industry.
On to the next point - I have great interest in going back to the early days of insurance when insurance was basically a co-op. Everyone throws money in the pot, and then if one of their homes burns down, they dig into the pot to pay to fix it. That also incentivized proactive protection, as everyone's money was in the same pot, and so making sure your neighbor's house was safe was as important as protecting your own. It also incentivized action, so if you saw someone's house on fire, everyone would volunteer to put the fire out ASAP, potentially lowering the quantum of damages. Now that insurance is faceless, no wonder all the incentives have ceased.
"Insurance exists so commerce can exist."
THIS! THIS SO MUCH! This is how I explain to people how important insurance is. If you could not guarantee that the goods you paid for would get to you, you wouldn't buy them. If directors and officers could get sued personally and lose everything, they would not serve on boards. If your car could be hit by someone without enough money to pay you a judgement, you wouldn't be willing to drive. And on, and on, and on. Insurance is what allows us to take risk every day, and without risk no one could operate in a capitalist society. Insurance keeps everything going. And that's why it's worth fixing the issues you note.
Wow, thank you for this amazing feedback! I'm glad I'm not alone in my insurance nerdery.
95% of claims seems like a fantastic number. Would you say most Canadian carriers have similar acceptance rates? I would not have guessed it would be that high, that's amazing.
No, I do not know what volume of coverage litigation occurs in the US, that's a great question. The stuff I tend to write about are when the carrier decides to deny a claim, and either the insured will take action against the carrier or the carrier will proactively seek declaratory judgment. I'd imagine this happens with a very, very small % of claims. With that being said America has a very active and very creative plaintiff bar. I'm not sure what the Canadian equivalent of the Telephone Consumer Protection Act is, but we have some plaintiff attorney's whose whole practice is to develop class actions based on TCPA violations. A law developed to protect consumers from spam and incessant sales calls is not being deployed by our plaintiff bar to coerce companies large and small to pay out massive fees for the TCPA violations.
Your point about clarifying that you don't want claims that the policy doesn't cover is well taken.
The "neoliberal capitalism creates a marketplace of individual greed" reminded me of Gordon Gekko's "Greed is Good" speech! And you're right that it's the inherent belief, the conviction that this is how things are that perpetuates this phenomenon. I don't know if I can change our beliefs about how this should work, but I'd like to try and push us towards that.
That's an interesting point, that the faceless corporate risk taker, the carrier, has replaced the communal risk sharing and risk mitigation strategies our ancestors used to employ, and honestly probably made us worse off in a way. I wonder if Risk Retention Groups or Mutual Companies will ever make a comeback.
I had an executive at Travelers explain to me, "Insurance is the grease on the wheels that are the global economy". I thought it was super cool when I found that quote from the English Act that created the first insurance court!
Thank you so much for your feedback and for taking the time to read my article. You put out a lot of good stuff as well, and I'm glad to have found a fellow insurance kindred spirit.
I can only speak to the three companies I worked at, but yes, denials were exceptionally rare. At all three our mantra was to seek out coverage, not denials - a mantra I wish was shared to the client more often.
Oh, we do have our fair share of those predatory TCPA claims in the US - all from the same rep plaintiff against multiple of our insureds. I hope that insurers are able to figure out a coordinated effort to stamp them out! They're the technology-based equivalent of people who get into car accidents on purpose.
I'm glad I'm not alone in wanting to change the reputation about and narrative about insurance! I wonder if I'll have less of an uphill battle here?
I'd love to start an insurance co-op here - I'm actually considering at least helping do so on a small island here where many properties are uninsured. I'll let you know if it gets off the ground :)
I am SUCH a huge insurance nerd, so THANK YOU for this article and those to come! I'm so excited to read more :)
Now this is my take from Canada, so I'm sure it's very different in the US, but I wanted to share my northern view. :)
"If the carrier covered every potential claim that came through the door then there would be no carrier."
True, if the underwriters aren't correctly assessing the risk that walks through the door. I would say that my team likely covers 95% of the claims that come to us. Why? Because our underwriters are very good at assessing risk, so most of our insureds never make a claim. And when they do, their brokers are educated enough to get their notice to carrier right. Sometimes they throw the spaghetti at the wall, but the brokers are pretty good about accepting the denial as reasonable.
Do you know what volume of coverage litigation occurs in the US? I don't, nor do I really know how much there is up here except for on my team. I'd love to find out. For my team, we've had four coverage claims that I know of in two years, and we've not lost any. I wonder how many are successful in the US - if it's a high percentage, then that would bolster your point.
"Carriers have to strike a delicate balance between paying claims they want and avoiding claims they don’t want."
I'd like to clarify that we "don't want" claims that the policy doesn't cover. :) I know there are some really awful, rotten, no good insurers out there with denial quotas that truly harm their clients. But there are other companies which truly want to service their insureds and give them what they paid for. The key is figuring out which is which and pointing your clients in that direction.
This brings up an important point - neoliberal capitalism creates a marketplace of individual greed. As you said, policyholders are incentivized to get as much as they can from their policies, as are insurers to give out as little as possible. I think it is this BELIEF about insurance that only makes both sides more polarized. Insureds believe the company will be out to screw them over, and insurers come to believe that the insureds are doing the same. And then these beliefs cause an even greater divide between the two sides, making things worse, as you say. And I agree, this is really hurting our industry.
On to the next point - I have great interest in going back to the early days of insurance when insurance was basically a co-op. Everyone throws money in the pot, and then if one of their homes burns down, they dig into the pot to pay to fix it. That also incentivized proactive protection, as everyone's money was in the same pot, and so making sure your neighbor's house was safe was as important as protecting your own. It also incentivized action, so if you saw someone's house on fire, everyone would volunteer to put the fire out ASAP, potentially lowering the quantum of damages. Now that insurance is faceless, no wonder all the incentives have ceased.
"Insurance exists so commerce can exist."
THIS! THIS SO MUCH! This is how I explain to people how important insurance is. If you could not guarantee that the goods you paid for would get to you, you wouldn't buy them. If directors and officers could get sued personally and lose everything, they would not serve on boards. If your car could be hit by someone without enough money to pay you a judgement, you wouldn't be willing to drive. And on, and on, and on. Insurance is what allows us to take risk every day, and without risk no one could operate in a capitalist society. Insurance keeps everything going. And that's why it's worth fixing the issues you note.
THANK YOU! I've nerded out enough :)
Wow, thank you for this amazing feedback! I'm glad I'm not alone in my insurance nerdery.
95% of claims seems like a fantastic number. Would you say most Canadian carriers have similar acceptance rates? I would not have guessed it would be that high, that's amazing.
No, I do not know what volume of coverage litigation occurs in the US, that's a great question. The stuff I tend to write about are when the carrier decides to deny a claim, and either the insured will take action against the carrier or the carrier will proactively seek declaratory judgment. I'd imagine this happens with a very, very small % of claims. With that being said America has a very active and very creative plaintiff bar. I'm not sure what the Canadian equivalent of the Telephone Consumer Protection Act is, but we have some plaintiff attorney's whose whole practice is to develop class actions based on TCPA violations. A law developed to protect consumers from spam and incessant sales calls is not being deployed by our plaintiff bar to coerce companies large and small to pay out massive fees for the TCPA violations.
Your point about clarifying that you don't want claims that the policy doesn't cover is well taken.
The "neoliberal capitalism creates a marketplace of individual greed" reminded me of Gordon Gekko's "Greed is Good" speech! And you're right that it's the inherent belief, the conviction that this is how things are that perpetuates this phenomenon. I don't know if I can change our beliefs about how this should work, but I'd like to try and push us towards that.
That's an interesting point, that the faceless corporate risk taker, the carrier, has replaced the communal risk sharing and risk mitigation strategies our ancestors used to employ, and honestly probably made us worse off in a way. I wonder if Risk Retention Groups or Mutual Companies will ever make a comeback.
I had an executive at Travelers explain to me, "Insurance is the grease on the wheels that are the global economy". I thought it was super cool when I found that quote from the English Act that created the first insurance court!
Thank you so much for your feedback and for taking the time to read my article. You put out a lot of good stuff as well, and I'm glad to have found a fellow insurance kindred spirit.
I can only speak to the three companies I worked at, but yes, denials were exceptionally rare. At all three our mantra was to seek out coverage, not denials - a mantra I wish was shared to the client more often.
Oh, we do have our fair share of those predatory TCPA claims in the US - all from the same rep plaintiff against multiple of our insureds. I hope that insurers are able to figure out a coordinated effort to stamp them out! They're the technology-based equivalent of people who get into car accidents on purpose.
I'm glad I'm not alone in wanting to change the reputation about and narrative about insurance! I wonder if I'll have less of an uphill battle here?
I'd love to start an insurance co-op here - I'm actually considering at least helping do so on a small island here where many properties are uninsured. I'll let you know if it gets off the ground :)