In America when you buy Top Sirloin, you know it’s Top Sirloin. It’s not hamburger. When you buy insurance you don’t know if it’s worth the cost of the paper it’s printed on. As a case in point, Sir Speedy Printing on Boylston Street in downtown Boston was shut down for two weeks after the Boston Marathon terror bombing. Sir Speedy had terrorism insurance but their insurer denies the Boston Marathon bombing was a terror attack and has denied paying the claim.
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The Intersection of Government and Insurance is the Problem
The problem in this case is that the insurance policy was not provided by PSM, the insurer, until after the terror attack took place. PSM claims to not be responsible because the policy reads that for them to be obligated to pay the bombing must be certified as an “act of terrorism” by the secretary of treasury, secretary of state and the attorney general.
In the home market this would be like an insurer including a clause that you will not get paid for fire damage to your home unless the fire is certified to be a “fire” by the fire marshall, mayor and governor of the state. This of course puts serious obstacles in the path of your collecting on a claim that is obviously a condition you wanted to be insured against, and a condition for which the insurer is providing protection.
Boston Marathon Example Highlights Issues with Insurance
This Boston Marathon bombing example above highlights the lack of a measure of quality for insurance. After years of analyzing insurance companies based on high-quality data, ValChoice clearly understands the insurance contract is not a measure of quality. Instead, the insurance company management team that stands behind the contract is what determines quality.
Without data analytics, consumers don’t have any way to assess which companies will and will not honor the contract. More transparency and more data analyzing insurance companies is sorely needed.
Other than insurance, few industries sell product without a measure of product quality. Some in the insurance industry would like customers to think the measure of product quality is equivalent to their financial strength. However, being capable of paying a claim and being willing to pay a claim are entirely different. Insurance companies need to be measured by, and held accountable for, claims payment. This is the only measure of insurance quality that consumer care about.
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