Canadian property and casualty (P&C) insurers have lost credibility with the public. Today, they are taking the first step on the road to reconciliation by acknowledging the failure of their efforts to communicate with consumers.
Are insurers poor communicators? “I think that criticism is well-founded. We don’t try hard enough to simplify and clarify our language,” admits Katherine Bardswick, president and CEO of Co-operators General, one of Canada’s largest insurers.
“Even here, at Co-operators, we could do better,” she adds. “And we’re going to make a serious effort to do so.”
“I agree that we haven’t done a very good job,” adds Shawn Jackson, chief financial officer at Kingsway General. “Over the years, we should have tried harder to educate the public about the realities of the insurance world. We play an essential role in people’s daily lives, and we need to make that clear,” he says.
Mr. Jackson believes the Insurance Bureau of Canada (IBC) should play a bigger role in this area: “They could do more to educate the public. That said, I agree with those who think the IBC did a good job this year regarding the 2004 profits reported by insurers. It shows industry leaders have finally become aware of this issue.”
“Insurers aren’t very good at explaining complicated concepts related to insurance,” agrees Gregg Hanson, president of Wawanesa Mutual. “Of course, it’s not easy. People don’t understand that what insurers do is basically predict the future. You might have a good year and then suddenly conditions alter drastically and your costs skyrocket. The number of accidents, the weather, the economy...A whole range of factors affect our work.”
“Do you know anyone willing to sell a product without knowing ahead of time just how much it will cost to make? Yes, we’ve got excellent actuaries doing that job, but they’re not fortune tellers,” he adds.
“In most industries, you want to sell your product to everyone,” he continues. “But in insurance, it’s just the opposite because you want to limit potential losses when conditions turn bad. And it’s not easy to explain that kind of thing to the average person.”
“I sometimes get the feeling the insurance industry is fighting an uphill battle in this area,” declares Ms. Bardswick. “It will take a lot of effort to turn this around, because the media prefers to concentrate on bad news. Our accomplishments are not very newsworthy. That’s just the way it is.”
Ms. Bardswick mentions the case of the fires in Kelowna. One of her clients was among the first to return to his home, rebuilt at the insurer’s expense after it was burned to the ground. “The first question journalists asked us was not whether we were proud to have been able to return people to their homes, but why we raised premiums, again!”
She notes that, unlike the life insurance or banking sectors, the P&C insurance industry has a great many players. She believes that banks have an easier time transmitting their message to the public because consumers are more familiar with their trademarks. In other words, the public understands the message because it recognizes the messenger. The fragmentation of Canada’s P&C market complicates the communication efforts of insurers.
And insurers must deal with opposing forces: consumers know they often have no choice but to buy insurance, but they hate shopping for it! “You’ve got to explain some complicated ideas in a very short time. And the “boring effect” of our products complicates our task. So we’ve got to cut through the jargon and emphasize concrete advantages. We’ve got to simplify our message,” she says.
“Making profits is healthy for any company,” points out Jean Vincent, senior vice-president and COO of L’Union Canadienne. “That’s how it stays in business. Making profits enables insurers to build up a war chest so they’re able to face more difficult years marked by events such as the ice storm.”
Mr. Vincent stresses that one large bank can make annual profits as high as those of Canada’s P&C insurance industry. “We lag far behind other financial services industries, where some players rack up a billion dollars in profits every quarter.”
According to Mr. Vincent, the public simply doesn’t understand that the insurance industry provides security to its clients. “Consumers have a hard time seeing the return on their investment and it’s up to us to explain more clearly how they gain by buying insurance.”
IBC weighs its options
For its part, the IBC is preparing a public relations offensive, although its top executives are not yet ready to specify the details.
“Everything is still on the table,” explains Mark Yakabuski, the association’s vice-president and director, government relations. “We are considering various strategies, and we’re not sure yet what communication channels we’ll use for what target clienteles. We haven’t even determined the scope of the campaign.”
Encouraged to clarify this position, Mr. Yakabuski explains that insurance is an activity falling under provincial jurisdiction. The industry faces different situations in each province, so it has to adapt its message accordingly.
But he is quick to acknowledge that the industry does have an image problem. “Our campaign surrounding the announcement of the 2004 profits was in response to the existing credibility gap with the public,” he explains. “We’ll have to patiently rebuild that lost confidence. We must present the image of a modern, efficient, humane, and dynamic industry. We’ve got to project an image of clarity and sensitivity.”
Mr. Yakabuski affirms that the industry has taken a crucial step in recent years: convincing politicians and regulatory authorities of the need for reform. “We earned the confidence of governments and regulatory agencies, and we delivered the goods,” he says. “Regaining the confidence of the public is the next step.”
It’s no secret: Money is the name of the game. Refusing to confirm whether the industry is preparing to invest heavily in a massive communication campaign, Mr. Yakabuski nevertheless declares that insurers are taking the current crisis of confidence seriously.
He compares this situation to that of the banks: “They were also faced with a serious image problem, and they spent millions of dollars in the 1990s to get their message across. Since then, the banking industry has risen significantly in public opinion. P&C insurers will never achieve the same result if they don’t commit massive financial resources to do so.”