The financial services industry, particularly insurance, is the least-trusted industry globally, according to the Edelman Trust Barometer 2013. This is not inconsistent with Maddock Douglas’s 2012 study that indicates that more than half of the U.S. population lacks trust for insurance companies and insurance agents. While these statistics make the insurance industry cringe, they generally do not come as a surprise.
We can blame a lot of different things for the lack of trust, such as complexity of products, intangibility, heavy regulation and maybe even the commission model. Just for kicks, why not throw the HealthCare.gov site into the mix? After all, everyone loves a common enemy.
Well, I don’t think fixing any of these things (including the website) will improve trust in the insurance industry. Why? Because the trust we need doesn’t solely rest with those who are employed by the industry. It should also rest with those who use it.
This dynamic is rather unique from a product category point of view, perhaps downright weird to many (as I wrote about in last month’s column). What drives the weirdness is the nature of pooling risks and having to monitor who can get in and who cannot get in to an insurance pool. This is why we ask questions about family history, driving record and pre-existing conditions (or at least we used to).
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Most, if not all, insurance companies started out around a very specific “who,” or, better said, a group of people with a common bond and also a common need to share certain risks. The common needs may have been for insuring their homes, equipment, health or even their lives. And the common bond may have been their religion, the type of work they do, their geography or possibly a military or other type of affiliation or affinity.
To those who were among the first in the pool, insurance didn’t seem weird. It just seemed logical. It was a better option than self-insuring against those risks.