Insurance is in a perpetual reputation crisis – how can it break the cycle?

Insurance has a reputation problem. While I doubt this is news to anyone, the problem has only grown over the past few years, with major insurers becoming the targets of public protests. Recently insurance’s reputation challenges have turned violent, with the killing of UnitedHealthcare CEO, Brian Thompson. While the act can only be described as horrible, even more chilling was the public support of the attack, as seen in a December Emerson College poll that reported 41 percent of voters between ages 18-29 found the killer’s actions to be acceptable.

Over the past few years, countless fingers have been pointed at various causes for insurance’s reputation challenges. Everything from oppressive regulatory environments to corporate greed has been blamed, but one common factor has been a fundamental disconnection between insureds and the industry. During the last few years of inflation, insureds across both the P&C and the health insurance spaces have seen premiums increase and coverages decrease.

However, the reasons behind those increases are not generally understood by the public, nor are most people aware of the steps the industry has taken to try and provide insureds more value for their policies. Ultimately, part of insurance’s reputation challenge is a crisis communications problem, one that has demonised the industry and has impacted business' ability to communicate with the public and attract top talent.

Understanding the reputation challenge

Insurance is in the unenviable position of interacting with the parts of people’s lives that are most sensitive – their homes, their health, their families and their businesses. As a result, the human factor is exacerbated, making finding a solution to the industry’s reputation challenge even more complicated.

It’s important to understand there is no single strategy, tactic or effort that will immediately fix the insurance industry’s reputation problems. That said, there are efforts the industry can make to move toward a better reputation. To start, we need to understand three of the major perception problems the industry is facing:

1) Insurance companies are viewed as greedy

While this may not feel right for those working in the industry, insurance has seen record profits despite inflation, while premiums have simultaneously reached record highs. Any of us know that the premium increases are due in part to industry pressures like catastrophic events for P&C insurers, rising healthcare costs in the life and health space, and other factors, the public either does not understand or does not care about these reasons.

While insurance is hardly the only industry to experience profits over the past few years, the public is more susceptible to outrage over the perception that companies are profiting from the most personal parts of their lives.

2) Insurance is viewed as a waste of money

Many policyholders, and in particular claimants, understand the value of insurance. But for everyone who does, many others do not. This is often exacerbated by laws that require insurance, leading to a perception that insurance is forced upon people. While these laws help protect drivers, homeowners and the public, they are still viewed as mandatory purchases – resulting in a hit to the industry’s reputation.

For many households, insurance is one of the most expensive items in the monthly budget. Considering most policyholders do not file claims monthly, there is a perception that insureds are paying for something and not getting anything of value in return. This idea quickly changes if a claim is paid out. However, in the meantime, insurance takes another reputational hit in the eyes of insureds.

3) Insurance is viewed as the bad guy

Setting aside any views on how claims are approved or denied, insurance companies are often viewed as denying as many claims as possible, regardless of merit. Efforts to mitigate meritless and fraudulent claims may play into this perception, and steps need to be taken to discuss how, why and when a denied claim can be appealed, and the presence of insurance fraud. A final note on this last point: national media have extensively covered stories about insurers either denying notable claims or exiting certain states entirely. This type of coverage, without counterbalancing narratives in the media on a regular basis, further contributes to the industry’s ongoing reputational struggles.

Steps toward the future

For the industry to overcome these reputational challenges – steps will need to be taken to better communicate with insureds and raise awareness of the value insurance offers. To start, the industry needs to consider the following:

1) Transparency is the path to redemption

When advising clients in a crisis, I have three core rules: Don’t Lie, Don’t Guess and Don’t Assume. Moreover, insurers need to use plain language when communicating with an insured, be wary of data that may be inaccurate, and be proactive in communicating to the public how the risk landscape is changing. While regulatory requirements often dictate the kind of information shared with an insured, extra steps can be taken to ensure policy holders actually understand the information they receive, and why it may be important.

2) Insurance needs to bridge the gap with the public

When I started working with insurance organisations, I was unaware of the massive innovation taking place in the industry. While some innovations may only be appealing to those working in insurance, there are some technologies being employed of which the public needs to be made aware. A notable example would be the wave of IoT devices provided to policyholders in the homeowner’s space. These tools not only reduce the chances of a potential claim but also provide homeowners with real-time information about their house. This starts to shift how homeowners view insurance companies and further promotes the idea that insurers are providing real day-to-day value that homeowners can touch, rather than serving only as a safety net for the bad days.

3) It’s time to break the bubble

Insurance professionals are really good at talking to other insurance professionals. The insurance media landscape is quite healthy, and as a result news travels quickly and professionals can remain up to date on current trends and challenges easily. That said, there is an echo chamber within the industry, in which industry leaders talk about the challenges facing insurance without the public hearing about it. Breaking the bubble is a challenge, as insurance is unlikely to land in the pop culture section of major publications unless there is a catastrophe. However, the industry can take steps to mitigate the barrier to entry.

Cutting the jargon in communications is a great first step. Additionally, insurance leaders should look at supporting recent attempts by industry groups and associations to educate the public about insurance. These initiatives have the potential to further break down the barriers between the industry and the public, resulting in better communications with audiences outside of the industry bubble.

Communication is only part of the solution

Overcoming insurance’s reputation crisis will take years of unified work throughout the industry to bring about the kind of change needed to improve its image. The first steps have already been taken by insurance businesses who have found better ways to communicate with its audiences. It’s time to build on those first steps, and to treat the industry’s reputation problems as a true communications crisis.

James McKinsey is the crisis team lead and a public relations manager at Kimball Hughes Public Relations.