Something Wicked This Way … Is Spreading Rapidly
on Nov 12 by Barry RabkinTags: competition, pricing models, societal interference
How many of you saw the article that Michigan may be putting a proposal in front of voters on the 2010 state ballot that if enacted would reduce automobile, home and business insurance premiums by 20 percent. The group – the Fair Affordable Insurance Rates – needs to gather more than 304,000 valid voter signatures and clear other hurdles to put the measure on the November 2010 ballot.
A few thoughts come to mind (that I can print and publish in a ‘family-firendly’ way):
- Part of the problem here is the insurance industry’s inability to express or other wise communicate its value proposition to its customers and prospects. (Life insurers have had this problem forever and still have not solved it)
- Inform Michigan voters that its alright to roll back insurance premiums by 20% as long as you also mandate a rollback of automobile and homeowners remediation expenses by 20% – for auto parts, for auto labor, for court awards, for plaintiff’s legal fees, for rehabilitation services, for medical products, … and, of course, for all products and services insurers and their field staff and their agencies have to use to stay in business
- Leave the State of Michigan entirely – make it one giant state-government run insurance company
- Provide bare-bones coverage for automobile, homeowners and business owners
It’s bad enough that far too many politicians seem to calculate how many votes they can buy to stay in office by mandating insurance premium discounts or not allowing insurers to charge actuarially sound premiums. It will be far worse if citizens think they have the knowledge to set premium rates.
So, for those insurers who do business in the State of Michigan: what are your contingency plans? And, have you built the horrendous possibility of this spreading into your own ERM models?
http://bit.ly/7Vcjvf
Cary White said:
Some of your comments on this are a bit strong and demonstrate your first point:
“Part of the problem . . . is the insurance industry’s inability to . . . communicate its value proposition . . .”
Insurance can be complicated and too many people refuse to acknowledge the complexities and insist on viewing the industry as something more analogous to a public utility. The developments in Michigan are merely a symptom of the larger problem of selling something intangible like insurance.
In the face of draconian legislation such as the Michigan legislation you are talking about, there are really only two short term choices: (1) stop writing in the state (if possible), or (2) embrace the change and restrict coverage in ways to offset the reductions. In either case, we all need to double down and resist the urge to sell price and concentrate on selling coverage more in the future. Until everyone in our industry gets better at selling coverage instead of price, we will all face this same problem over and over again.