The perception of customers in urban communities is that the insurance companies “love” the profitability, but “hate” the risk.

Conversely, the perception of the insurance company is that urban communities have seemed to “love” filing claims, but “hate” paying adequate premiums.

Are these perceptions real or imagined?

A few colleagues and I decided to see if it truly was a “thin line” between love and hate, and if so, could we find ways to erase the line so that everyone could become a winner. Everyone loves to win.

Over the past nine years, within the fourth largest city in the United States, a group of Philadelphia agents has pioneered a quiet movement that has changed the way several insurance companies have conducted business for tens of thousands of urban consumers. The name of the organization is The Insurance Cooperative.

Integrated in this movement is a different perspective and positive outcome, which has benefited not only the urban consumer and the insurance agent who sells the policies in the urban areas, but also the insurance companies who have dared to venture into waters rumored to be shark infested and dangerous.

We have turned a virtually losing scenario into a winning situation for all. In doing so, we have become part of the solution.

Insurance is a necessary aspect of life. It affects us economically, socially, psychologically and spiritually. Clients who go without it may experience financial loss, stress or even punitive measures. Yet consumers know little about it.

Understanding insurance and the industry should be a high priority in our communities.

Consumers need insurance for peace of mind. Insurance protects their hard-earned assets from most unforeseeable accidents or catastrophes. Unfortunately, rates and customer services vary depending upon where one lives.

In my experience, customers living in our inner-city neighborhoods have found the cost of insurance is usually high while the quality of the policies and the customer service is often lacking.

Historically, the term redlining has been associated with the insurance industry when it fails to provide affordable, comprehensive insurance policies to certain segments of the population. This phenomenon is usually targeted toward urban communities.

Proponents argue that risk and losses are higher in the urban communities, therefore rates should be higher. Opponents argue that the statistics are skewed and it is unfair to discriminate between individuals based upon their demographics.

Clearly, there are real and perceived challenges that exist between the consumer, the agent and the insurance carrier in urban areas resulting in the need for re-education and a collective approach.

Another concern is the adversarial relationship between insurance companies, agents and the consumers. Are most urban residents out to defraud the insurance company–to make a quick buck at all costs? Are most urban insurance agents in business to sell you the least quality products for the highest price? And would most insurance companies be opposed to doing business in urban areas if they felt that their ability to yield a profit was above average?

If you answered no to all of the above, you are on the right track.

In part, this adversarial relationship stems from fraud.

Does insurance fraud exist? Absolutely, and to the tune of between $85 billion to $120 billion a year. The impact of this fraud costs each household an average of $200 to $330 a year in higher insurance premiums, according to figures released by the Insurance Information Institute.

However, this fraud is being committed by a small segment of the population. Yet, we all allow those relatively few culprits taint the entire insurance environment with the urban areas absorbing the major brunt of the cost.

We must all make the connection of higher insurance cost being an outgrowth of unscrupulous lawyers, doctors, auto repair shops and insurance adjusters working on the behalf of the insured willing to file fraudulent claims. Honest insurance agents and policyholders should not take the “ostrich approach,” keeping their heads down in the sand while their “butts” are in the air being kicked by a lack of urban markets and higher insurance rates.

The Philadelphia agents working through The Insurance Cooperative believe that the solution lies in changing the way we all think through re-education. There is a need to re-educate the consumer, insurance agents and companies alike.

First, consumers must not view insurance as an unnecessary malady, but rather as an “asset protection” mechanism reserved to make the insured “materially whole” again in the event of a valid claim.

As a further example of re-education, an auto liability policy claim should be filed only when real injuries have occurred. By filing a bogus or exaggerated claim, the insured is committing insurance fraud–the No. 1 contributing factor to higher insurance rates for us all.

When caught, not only will their claims be denied, but they also can face possible criminal prosecution. Insurance consumers need to know this, and it behooves the agent to emphatically state this to the insured.

Second, insurance agents and brokers, despite the unwillingness of most insurance companies to conduct business in the urban areas, need to change their belief system toward serving the urban consumer. Even if the “shoe sizes” (insurance products) are limited, agents should not take the common approach that one size fits all. Producers must determine which client qualifies for the best rate and then work collectively with other agents to attract competitively priced companies to do business to serve these qualified clients.

Finally, agents need to set up community meetings with their underwriters and urban consumers. The reality that underwriters will see is that their insurance policyholders and agents who sell their policies are honest, law-abiding citizens.

In these settings, the companies can work hand-in-hand with consumers and agents to collectively address the real (not imagined) challenges faced in the urban environments. This process leads to collectively isolating and activating win-win scenarios for all involved.

Changing the way we perceive one another through a comprehensive re-education model that collectively addresses the real challenges ultimately will lead to more affordable, quality insurance coverage to those that qualify regardless of where they reside.

Put it to the test. Organize the insurance professionals, both company representative and agents to attend community meetings to educate and inform the insurance consumers. Because, whatever the future of the insurance industry, we can be sure of one thing, we all need it.

The Insurance Cooperative has proven that you can offer comprehensive insurance products in urban communities that are affordable, but at the same time yield a “fair” profit for the insurance companies, if we are all willing to go the extra mile. We all can indeed be winners.

Donald W. Lewis is president and chief executive officer of The Insurance Cooperative in Philadelphia and the author of the book “Everything to Win, and Nothing To Lose.” He can be reached at [email protected].

Reproduced from National Underwriter Edition, June 23, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.