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Jul 1, 2015

The New Ethics of Insurance

by Jennifer Overhulse

Insurance has an image problem. Each time a claim is denied, a premium is increased, or a loss paid at less than current market value, fingers are wagged at the insurer, even if the action was completely justifiable based on policy language. And, health insurers are not helping the cause. In a recent article, “Seeking Rate Increases, Insurers Use Guesswork,” The New York Times cited insurers “seeking wildly differing rate increases in premiums for 2016, with some as high as 85 percent,” as reported by the federal government “for the 37 states using as their exchange.” Really? 

That said, is it really surprising that recent research by the Coalition Against Insurance Fraud finds less than two in five people have a “favorable impression” of the insurance industry? And, perhaps even worse, approximately one in five Americans think it is acceptable to “defraud insurance companies under certain circumstances.” Does everyone lie about how far the drive to work is every morning? Clearly, there is work to be done on this relationship from both sides, but a solution will likely have to be driven by insurers instead of the public at-large. 

For an industry with such noble beginnings and a foundation built on a desire to homogenize and mitigate risk in order to protect individuals and businesses, this seems a truly sorry state of affairs. The problem is, at the end of the day and in spite of all those noble beginnings, insurance companies are businesses, laser-focused on turning a profit, protecting not only policyholder assets but their own as well, and growing the bottom line. This often means turning to new sources of information and new technologies on which to base rates, product definitions, claim decisions and changes to coverages.

Credit scores were an obvious choice, and insurance companies quickly made the leap from slow payments and high amounts of revolving debt to a lack of responsibility and a potentially higher insurance risk. Debates about the ethics of this decision ensued, and ultimately, credit scores were “in” for underwriting. Today, emerging technologies are opening new channels for insurance and creating new sources of incoming information about policyholders, their health, their homes, their claims, their spending habits and buying preferences. 

In fact, since some reports find more than 25 percent of social media users do not take advantage of built-in privacy settings, a veritable cornucopia of data is publicly available on social networks. But, that brings us back to ethics, doesn’t it? How much of the information or intelligence acquired via new channels, sources or technologies can or should insurance companies use?  Does it matter whether the information is about property, or if it is more personal information, like that gleaned from genetic testing?  

Before it is possible to rate and quote based on any of this information, insurance companies have some important questions to answer which will potentially impact not only the company and brand perception in the marketplace, but the company’s ability to do business as well.  So, does that make this a branding discussion?  The new ethics of insurance demand a protector of the brand.  That may be a different person representing a different position within each and every insurance company, but the task must be assigned to someone with decision-making authority and the ability to “own it” at a corporate level when business practices, technologies, or even advertising campaigns need explaining on a public stage. To the old saying, “if you don’t stand for something, you will fall for everything.” 

The conversation will continue at ACORD2015 this November in Boca Raton.  To be a part of it, visit the event website and register today!

Jennifer Overhulse is the principal owner of St. Nick Media Services.  She can be reached for further information or comment via email at, or tweet her @stnickmedia.