As the insurance industry pushes ahead into the next decade, adapting to change and, in some cases, leading change, those committed to the industry and its purpose face an underlying tension that they all wish would just go away.
They wish the industry were not so hated by the public.
While hate is a strong word and potentially offensive—relative to other products, services and industries—insurance definitely ranks toward the bottom relative to respect. On my personal quest to impact this, I find that you can learn a lot by examining the worst of the possible behaviors—that is, insurance fraud.
(Related: 5 Traits of a Nondisruptable Advisor)
Recently, my colleagues at Maddock Douglas and I engaged in some conversations with both LexisNexis and Swiss Re on this subject. Both organizations have some interesting lenses to look through. In fact, the three companies will be doing a webinar to share these views on Aug. 10.
First and foremost, it was surprising to hear how big the problem of fraud actually is. LexisNexis Risk Solutions, through a variety of sources, has reported that fraud costs the insurance industry over $80 billion a year. Also, there are interesting flavors of such fraud, ranging from out and out intent to steal money from insurance companies all the way to “little white lies.” The ability to detect and size that behavior is very helpful in creating realistic expectations around costs and isolating areas for improvement.
I find the white lies more intriguing and potentially helpful in understanding the problem because they are more widespread and harder to detect. Additionally, I suspect that some of that behavior stems from a lack of understanding about how insurance systems work, with consumers not necessarily realizing that “misbehaving” has a cost.
Swiss Re has some interesting insights about the behavior and what impacts it as well. In fact, they’ve leveraged behavioral economics to learn that the context, order and style in which we ask basic underwriting questions can make a big difference in the truthfulness and accuracy of answers.
I believe there is yet another lens that we can put on this challenge: specifically, social norms. Insurance is a social construct; however, we treat it like a product. Social constructs—such as electricity, cable TV, public transportation, public parks, schools and community resources—are shared. The behavior of a few with respect to those shared constructs impacts the many. Additionally, it is the many that have responsibility for their preservation, especially when they start to break down.