Does Insurance Knowledge Really Matter?

The Home and Auto Insurance industry is fundamentally broken!

It is built upon the premise and business model consistently demonstrating that insurance products:

Are commodities that should be purchased like beans and rice, and,
Require zero educational commitment from a glutenous industry to a more than willing consumer base.

It doesn’t take a rocket scientist to see the portrayal of home and auto insurance as a product to be shopped for just as one buys tangible products at Walmart or HEB. Quality and unique financial fit are rarely discussed in the marketing, selling and/or implementation stage; even though it is a financial product. In essence, one size fits all and sell a product and/or it’s components regardless of what is right for the individual consumer prevails in the industry.

notebook with graph of insurance advertising.

Photo by rawpixel on Unsplash

Case in point; the insurance industry spent $332.9 billion in 2015; $6.5 Billion on property & casualty Insurance advertising alone, with GEICO leading the pack spending $1.3 Billion alone [J.D. Power 2017 Shopping Study]. Despite billions being spent on advertising, little is being done to promote consumer education. A 2016 survey by PolicyGenius reveals that half the country can’t even define what a deductible is; let alone the different parts of the auto policy! I am often-times perplexed as I sit with clients that don’t know what coverages they have, why they need a recommended protective endorsement, and how their auto policy should integrate with their overall financial needs and goals!

Even more alarming is the public’s’ ignorance of the essential components of homeowners’ insurance. For the average American, a home typically represents their biggest asset. If this is the case, wouldn’t it make sense to protect it appropriately? Yet, the public cannot differentiate between replacement and depreciated [ACV] claims settlement; Nor have a clue about an open perils policy versus a named perils policy! The average consumer buys his/her homeowners’ insurance based upon comparative price and are clueless to “what’s under the hood”. For a majority, they fail to understand how endorsements work and do not have an advocate or agent representative counseling them because many buy online.