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Insurance consumer revolt is far from over.

Insurance Consumer Revolt is Far from Over More than 2,000 professionals representing all facets of the excess and surplus lines industry gathered together to discuss the future of their marketplace and insurance in general at the 15th Annual National Association o Professional Surplus Lines Offices Convention, held in New York recently. The convention featured four panel discussions organized around the central theme, "Surplus Lines in the 1990s."

The highlight of the convention was the panel discussion "Where is the Insurance Consumer Revolt Going?" The panel for the program included Easther Peterson, consumer affairs consultant to the National Association of Professional Insurance Agents (PIA), Robert Hunter, president of the National Insurance Consumer Organization, John Crosby, vice president and general counsel to the National Association of Independent Insurers, and Donald J. Greene of LeBoeuf, Lamb, Leiby & MacRae.

"What I am here to tell you today," said Ms. Peterson, as she opened the discussion, "is what many of you have already said before, and that is that the consumer revolt did not start with Proposition 103. It started a long, long time ago, and I remember because I was there."

"I shall never forget when President Kennedy and then President Johnson first asked me to come and help them do something about the small but growing revolt of insurance consumers. They wanted to assure the American people that the government would not allow the insurance industry to have free reign to pick consumer's pockets.

"Kennedy knew even way back then," continued Ms. Peterson, "that this consumer revolt was becoming a political issue." One of the most important things that he showed members of the industry was that listening to consumers and being sensitive to consumers' needs would help their bottom lines, she said.

"Today, the consumer revolt is branching out in a great many ways," she added. One of the things we are trying to do at the PIA is say to consumers and insurance industry groups, 'Show us new ways of getting together around a table andtrying to work out at agreement [on issues such as price rollbacks].' Of course, we have differences, but I'm sure that many of you would be surprised at how often both sides actually agree on the issues. Over the years I have heard many individuals start off by saying, 'I won't sit down with so-and-so,' but when they do sit down they find that have very similar ideas. You have to open your minds to the new thoughts and the new streams of ideals that are making their way into the marketplace."

Addressing the issue of where the insurance industry as a whole stands on opening a constructive dialogue with consumers, Ms. Peterson noted that we are at a point now where the industry and consumers are willing, much more readily than in recent years, to sit down and work on the problems facing both sides. This situation is greatly due to the fact that insurance companies have seen consumers, in ever-increasing numbers, seeking to play a much larger role in shaping decisions that affect them economically. She added that, "You must all be aware that the consumer movement is a strong, growing movement and not only in the United States. There are now a number of international consumer organizations representing 61 countries, and I'm beginning to see insurance topics on their agendas."

One of the oldest and most blatant impediments blocking reforms in the insurance industry, according to Ms. Peterson, is the deaf ear being turned toward consumers and agents alike by the executives and upper management of many insurance companies. "Whenever I speak with insurance agents, I ask them why they don't take the complaints and suggestions of their customers to their superiors, and they often tell me that their superior just won't listen to them. I call this a need for a 'trickle up' of information. These suggestions and complaints have to [make their way up to the board rooms] to change the present state of the industry. Industry as a whole must improve its listening ability, which begins with opening up a dialogue with consumers," she said.

Ms. Peterson called upon industry leaders to solicit feedback from consumers and not simply sit back and wait for customers to speak out. Agents should always question customers on how companies, and the insurance industry as a whole, can improve their services. This type of action will convey to the consumer that the insurer is interested in his opinions and is concerned with his specific needs, she said.

"It is also important to do what a number of consumer groups are doing," she explained, "and that is to have top people from the insurance industry who are tuned to the voice of the consumer acting as liaisons to these groups. These must be people who have credentials in the consumer movement that people will listen to. And this cannot simply be a token gesture."

"One of the most important things for the insurance industry to keep in mind is that the consumer movement is no longer just a bunch of disgruntled housewives," concluded Ms. Peterson. "We have gone beyond that and are now led by sophisticated bureaucrats who are extremely knowledgeable about products and services."

According to Mr. Hunter, trying to figure out where the consumer revolt is going is "a lot like trying to plo the course of a hurricane. There is so much activity and its direction often appears different to people observing it from different perspectives. And like a hurricane, the insurance market has something that drives and steers it. With respect to the consumer revolt, if you had to put your finger on it, what steers it is what the people want. Sure, we can get a push forward by an artful advocate such as a Ralph Nader or an Easther Peterson, but if an advocate takes the movement someplace where the people don't want it, it falls. And this has happened to people like that. No individual can create a movement by rhetoric; for any movement has to have substance."

By the same token, added Mr. Hunter, no movement "can be pushed back by some type of fluffy media campaign. [An industry or individual company] cannot simply say, 'Hey, we're really the good guys! Go away!" You can't just say it, you've got to prove it."

Mr. Hunter believes that, in the end, the consumer movement will always go wherever the people will take it. "Some of the things the consumer wants," added Mr. Hunter, "are to be charged a fair price for insurance, to receive good service, especially when a claim is made, and to be treated with respect. For too long, the insurance industry has been invisible and invulnerable and unwilling to accept even the most minimal of reforms. Part of the reason Proposition 103 kind of swept over California was the ability of the insurers to hold off even minor reform as a safety valve in the legislature for many years."

According to Mr. Hunter, as a result of his years of experience in dealing with consumer groups, he has found that "whether it's right or wrong, the public believes that insurance does not measure up [to what it could be] in terms of price or service. And consumers don't believe the insurance companies when they speak. The polls in California during the last election show that 70 percent of the people believe Ralph Nader and under 10 percent believe the insurance companies."

"The new California polls are very interesting," added Mr. Hunter. "The people don't believe they are going to get a rollback, but they are happy, in increasing numbers, that Proposition 103 passed. It's not just that they want to save some money, but rather that they want to see some sort of discipline being imposed on insurance companies."

There are a number of reasons why consumers have developed such a negative opinion of insurance companies. "The price of auto insurance has skyrocketed due to inflation," said Mr. Hunter, "and there have been a number of other factor including the liability crisis, and the health insurance crisis, which is probably going to make everything else look like peanuts by comparison. In addition, there have also been a number of negative stories in the press concerning Medigap credit and life insurance which have helped to present a picture of an industry that does not service its customers the way it should. While these stories are not always true, they do serve to create a lot of smoke, and as a result, the people are concerned."

Mr. Hunter may have put it best when he said, "No one knows for sure where this hurricane of consumer revolt will hit. It could land on a private sector solution such as the co-op insurance we have seen crop up in Baltimore and Philadelphia. Or will it land on some private sector solution? Only one thing is for sure, and that is that it will land in a more effective and more efficient place--a place where people can receive the most comprehensive service possible at a reasonable price."
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Author:Furino, Lou
Publication:Risk Management
Date:Nov 1, 1989
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