Due to the Covid-19 crisis, the world is going through an extraordinary moment and while all sectors are hit, the (re)insurance sectors are particularly affected for two main reasons.
There’s no doubt about it, Covid-19 will amount to be one of the biggest insurance claims in history, but the event has also highlighted another serious issue: our sector has a bad reputation with the general public.
The explanation for this disenchantment is multifaceted.
First of all, the sector is a victim of its very nature, the famous reverse cycle: a promise (moreover, unpleasant and uncertain) which will come long after the expenditure.
In contrast, it is obvious that the comparison of purchasing insurance with the purchase of a smartphone whose enjoyment is simultaneous with the expense, is difficult! In insurance, for example, this marketing difficulty is recurrent in agricultural insurance where the product suffers from low take-up rate, and still remains unsolved when it comes to long-term care insurance.
Naturally, this deferment of satisfaction creates fertile ground for a certain media and political demagogy. We already knew there was an information imbalance between insured and insurer, which can lead to adverse selection.
It is now confirmed that there is also a worrying emotional imbalance. This phenomenon had already been seen in serious bodily disputes where social inflation of compensation amounts are partly caused by sympathy for plaintiffs.
It has become more obvious this year in the disputes between restaurant owners and insurers over the business interruption.
We have, moreover, seen some insurers completely change their policy for handling Covid claims - not based on their legal analysis, but by feeling under pressure from certain media. This image risk is now clearly established and constitutes an element which should be integrated one way or another in the pricing of insurance policies.
Then, there is a general lack of awareness and even a lack of interest in the general public in the Insurance Sciences. However, Insurance is ubiquitous in our lives and represents a significant part of families' budget - up to 20 percent of the budget in some countries goes towards property and health insurance.
To address this misunderstanding of pooling mechanism, it would probably be a good idea to implement appropriate and adapted marketing.
For several years now, excessive segmentation and targeted marketing treats each insured person as an individual and has made him lose sight of his place in the mutuality.
Collective necessity should be spotlighted, perhaps by using concrete examples: how many citizens know that to compensate for a traffic accident with a bodily injured person, you could need the total annual motor premium of a city with a population of 20,000?
By the way, it would be useful to simply recall an obvious fact : to finance claims one needs a premium. Demagogues expect insurers and reinsurers to compensate all restaurant owners, bartenders and nightclubs around the globe. But let's not forget that, except in very few cases, no one has really insured against this specific risk, so no one has paid.
As countries gradually are setting up national pools as a first solution against the future pandemic, the financing of these pools will only be possible through an additional premium, particularly during this time of low financial yields.
We should also promote the societal role of insurance. Consciously or not, it alleviates our fears. We should guide policyholders to help them better identify their fears in everyday life. By doing this, insureds could adapt their insurance, optimise their budget by focusing on their areas of concern and avoid paying (sometimes several times over) for an insurance that does not interest them.
With this in mind, a lot of contractual work will be necessary across the board and is already in progress among all professionals in the sector to allow a better understanding and greater transparency of the contracts.
(Re)insurance is an exciting, interesting, and vital business that unfortunately few know about or understand properly. It’s time for a sea change!
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