It’s really a shame that so many insurance companies knocked themselves out in the 1990s by reinventing themselves as “financial services companies.”
It’s also a shame that insurance agencies followed suit, reinventing themselves as financial services advisors or professionals.
That is, they knocked themselves out of their distinctive identity. They merged into that amorphous business called financial services, and they blurred the edges of what insurance is and does.
The guarantees, the promise of future benefits, the protection against unforeseen risk–all lost their luster in the financial services buzz. Those elements were still offered in the products, of course, but their presence was devalued or ignored.
The industry didn’t mean to let that happen, but it happened all the same.
Talk to consumers who are not affiliated with the business, and this becomes rapidly apparent. Many with whom I speak have a hard time defining insurance, or linking any of those elements to it.
Some know they need it–health insurance, especially, followed by auto and homeowners–but many are fuzzy on where the products come from, especially if obtained at work, and their respective features (beyond the generalities).
Further, most are not sure where to go for help sorting out their insurance needs from other financial needs.
Some know the term “insurance agent,” but they also use it interchangeably with “rep” and “advisor,” even “bank guy.” It’s all the same to them. A good many have no idea what body licenses these individuals, the types of licenses they have or should have, or if they need licenses at all.
Worse, their expectations of insurance, versus other things financial, are really bollixed up.
Here is the problem with all of this: When financial services “providers” and “professionals” offer insurance, consumers naturally come to link insurance to financial services. (Hey, that was the goal, right?)
So when financial services providers get in a pickle, as has been the case for the past 8 months or so, consumers hook that up to the insurance products they own or are offered, and they get jittery or suspicious.
Agents report sales are getting harder and harder to complete, because there is so much uncertainty about which financial products are safe and which are risky.
It’s not just consumers who are confused. It’s business people, legislators and regulators too, especially if they started their working lives in the 1990s when the insurance word was already graying out. Some have probably always thought of insurance as symbiotic with or part of other financial products, regardless of the legal distinctions they still hold.
Think about it. Is it any wonder that the Securities and Exchange Commission and the Financial Industry Regulatory Authority are acting as if the insurance domain is on their own turf? Is it any wonder that certain legislators think the same way? Is it any wonder that these and other interests want to modify–or, as they put it, “clarify”–the Securities Act of 1933 in areas where the Act conflicts with their “merged” concept of financial services?
The financial services movement is not a bad thing. In fact, it has much to recommend it. It facilitates bringing the 3 main financial sectors–insurance, banking and securities–into one house. That can create economies of scale for the firms and, when coordinated with government benefits and programs, a unified approach to financial care for the customer. Thoughts of financial wholeness come to mind.
What is bad is that the meaning and function of the individual financial sectors are being lost on consumers.
In an economy like today’s, where many people are looking for safe places to put their money, that is a major problem. The credit-related stain on the financial services name is being passed through to insurance, and, as noted above, people are holding back out of fear and uncertainty.
This is as good a time to fix the problem as any. Bring back the I-word and educate on what insurance is, does and guarantees. Be transparent. Tell who provides the guarantee and what it covers and does not cover. But do distinguish it from other types of products and services.
Yes, some mutual funds are starting to offer guarantees too, via annuity features sold in tandem with the funds. These are guaranteed withdrawals for retirement income. But here too, it helps if the consumer understands insurance. That is because it is an insurer providing those withdrawal guarantees, not the mutual fund company. That means something. The feature is not just a whimsical hope. It’s guaranteed by a company that specializes in such guarantees. That spells safety.
If there was widespread understanding of the value of insurance, that message would really resonate in today’s market. It’s time to make that happen, don’t you think?