Now I am attempting to comment on what I have seen and heard over the years. When I came here, there was for me, as probably for many of you, sheer confusion over what was going on. It's going on my fourth year. I've come to understand this business better and realize there is a chasm of understanding between the insurance industry and the rest of the real world.

My perception of this industry was like many consumers who buy insurance today auto, home, life, health. What more was there? I've learned differently.

I've also learned something that no one ever told me way back when I purchased my first auto insurance policy. Yes, I knew I had to buy car insurance because the law said I had to in order to drive, but what about the social context? What about peace of mind or protection against catastrophic loss? I don't recall anyone ever making that case to me, especially my insurance agent, or my knowing enough to ask.

I purchased my insurance and started driving. That was all insurance meant to me until I hit a tree in the middle of nowhere. I fixed the car up, reported the accident, had no collision coverage on the car, and saw my rate go up. The tree never filed a claim.

Today, I understand why my rate went up. I understand better the nuances of underwriting. I understand the factors that go into premium pricing. I'm involved in this business now.

But most consumers are not. Many people who do buy insurance don't understand why their premiums increase after a claim, or even after no claim. Insurers have deep pockets, they reason. Raising premiums is viewed as taking advantage of them.

They have an accident and think, “Why do you renege on this understanding of providing insurance at a set price and then raise my premium after I file a claim?”

I don't think a customer has ever gotten a satisfactory answer.

Which raises the question: Does the insurance industry have a public relations problem?

During a conference of the Minneapolis-based Professional Liability Underwriting Society in Orlando back in 2002, TV talk show host Charlie Rose asked this question. Sax Riley, who was then on his way out as the head of Lloyd's, said the industry had done a poor job maintaining its standing of reliability with the public, as well as combating the “deep-pocket syndrome.”

Constantine Lordanou, president and chief executive officer of Arch Capital Group Inc., based in Bermuda, who was also part of a panel of executives speaking about the industry, said that while the media bore part of the fault for focusing on the negative, the industry had to accept its own share of blame for not getting its story out about helping individuals and assisting in economic recovery after disasters. He cited Sept. 11 as an example.

“The story has not come out, and we have to blame ourselves for not getting the story out,” he said then.

Has that story come out in the past couple of years? I don't think so. Indeed, with the court battle over coverage for the World Trade Center, you have to wonder whether the public believes the industry is trying to talk its way out of its obligations to pay on a policy technicality.

From the text of a speech delivered by Lord Peter Levene, current chairman of Lloyds, in London in the beginning of February, talking about the industry and the need for improvements, he said: “Insurance plays a key role both in the economy and wider society, but we have traditionally done a very poor job of communicating these roles and working together collectively to advance them.”

The hard market did not help. I can tell from a few friends of mine who watched their rates double or even worse for their business during the hard market, and could not understand why. These people have certainly not grown fonder of the industry.

Agents and brokers, as the first line of contact with the public, have a responsibility to explain the process to customers. But they cannot do it alone. Like the educational information and partnership some insurers have put together to educate consumers about how to reduce or eliminate certain claims, the same facilities need to be created to educate the public about how the industry works and why.

We need a plan on how agents can better market the reputation of the industry, besides how to sell products.

If one thinks that the reputation of insurers does not need improvement, consider the current debate over federal chartering. Legislators will ultimately decide the fate of the industry's regulation.

Despite all the political contributions associations make to legislators for influence in the decision-making process, the members of the House and Senate ultimately answer to voters. And those voters outnumber all the company executives, agents and brokers combined.

If there is a groundswell of support to alter the current system, in whatever incarnation legislators finally decide, no insurance industry association would have enough influence to alter the debate in their favor. Ultimately, legislators do report to the voters.

A little industry public relations geared to consumers wouldn't hurt.

Mark Ruquet is an assistant editor at NU, covering the agent and broker beat. He may be reached at [email protected].

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 19, 2004. Copyright 2004 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.