Explaining Coverage to the Consumer

If insurance is indeed sold and not bought, it is because consumers continue to find the product complex and confusing. This may be less the case with car insurance in the age of online quoting and shopping. but even with that line of business, consumers may be more focused on price than on the arcane wording of policies and the actual details of the coverage they are purchasing.That thought struck me as I watched Allstate's recent "Pop Quiz" advertisement, which invites consumers to ask themselves, "Are you covered?" The ad takes viewers through a set of unusual accident scenarios and, through the compelling voice of spokesman Dennis Haysbert, plants a seed of doubt:

What if you hit a car because another car hit you? What if you hit one that cost more than $60,000? What happens if your friend wrecks your car? Or if a city tree falls on it? What if someone breaks in? What if? Are you covered for that? Don't hope so, know so. Call Allstate agent today for a free Good Hands Coverage Checkup."

The ad executes an ingenious diversion from the simple question of price that has driven so much business in the direction of Progressive and GEICO. It taps into the appetite of more engaged insurance consumers who increasingly expect to make more informed decisions, and it avails itself of one of the most powerful motivating forces: fear.

Homeowners' insurance aggregator HomeInsurance.com took a similar approach with an Aug. 18 press release about a survey it conducted. The survey found that 54 percent of all homeowners admitted they knew "not much at all about their home insurance policies.

As with Allstate's ad, the release is calculated to drive consumers to its site (through the intermediation of story-hungry journalist) where it can offer up quotes from its carrier partners such as Travelers, Safeco and Foremost. HomeInsurance's ploy sweetens interest by making the ignorance of consumers a matter of public record, adding a layer of humiliation to the basic fear ploy it shares with the Allstate ad.

Lest I'm misunderstood, I don't see anything wrong with this at all. Quite the contrary. Alerting consumers to ignorance that may cost them is a public service. If Allstate and HomeInsurance gain more mindshare in the process, good for them. Consumers remain responsible for sorting out what coverage suits them, and from which insurance carrier.

To that extent, these ploys are a win/win for carrier/distributor and consumer. But the value goes even further. Encouraging consumers to learn more about the specifics of coverage will help them to avoid under-coverage. If it's worth having insurance, then it's worth having enough insurance to secure one's property. If consumers understand their exposure better, they are likely to minimize their own risks by buying adequate coverage. Insurers have been trying to crack the under-coverage problem for ages, so this is a major step in the right direction. Policy holders buying more comprehensive coverage means good business for insurers. Furthermore, adequate coverage helps insurers avoid one of the biggest sources of bad insurance PR: policyholders who feel they've been cheated when their insurer informs them that they're not covered for a loss.

In that vein, the level of transparency afforded by collaborative examination of coverage creates a higher level of trust between consumer and insurer, and not least by conditioning realistic expectations for the claims experience.

As technology has made price comparison a competitive battlefield, it can similarly help insurers to invite comparisons with regard to coverage transparency. The next step for efforts such as Allstate's "Coverage Checkup" will be for them to rise from being a gimmick to attract customers to being a standard service by which insurers can further differentiate themselves. This service will likely develop as have others in the e-commerce realm, appearing early on in the form of tools in the hands of CSRs and distributors, and later as self-service functionality available through the carrier's customer portal.The next step for efforts such as Allstate's "Coverage Checkup" will be for them to rise from being a gimmick to attract customers to being a standard service by which insurers can further differentiate themselves. This service will likely develop as have others in the e-commerce realm, appearing early on in the form of tools in the hands of CSRs and distributors, and later as self-service functionality available through the carrier's customer portal.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio