If you’ve read Part 4 of this series, “Insurance Policies are like Swiss Cheese and Pokemon,” then you understand why insurance policy documents are often long.
I also noted in that piece why I think they are confusing. To awkwardly quote myself, “Insurance policies are basically giant contracts full of “if this, then that”-style legal language. They are written primarily to be interpreted by lawyers and underwriters, then the insurance-educated broker or agent, and last; the buyer of the policy.”
Let’s just do a little side quest into those roles;
Because it’s a contract, and because insurance companies want very precise language defining which rare and expensive scenarios the policy applies to and which ones it doesn’t. When a customer and their insurance company disagree on what should have been covered or paid out, having airtight legal language in the policy is helpful.
Underwriters get all up in the policy creation because they study the risks that might impact the precious things being insured. They also have a big role to play in writing the application, because for each “subcoverage” outlined in the policy, they probably have some data in mind that would help them decide who it should be sold to.
For example, say you are an underwriter writing a new kind of data breach coverage for health tech companies. You’re going to want to ask, in the application for that coverage, about how a health tech company is collecting and storing private information about its customers. If they’re doing it in a modern, secure way - offer the coverage. If they’re all aboard the hot mess express - don’t sell them the data breach coverage, or sell it at a high price.
Right? Because the insurance company does not want these insurance-policy contracts with a bunch of super risky customers that are likely to file claims (read: ask the insurance company for money back.) An underwriter writes the policy to balance that equation.
Underwriters also step in when someone applies for insurance that seems pretty weird on their application. If that health tech company we just described casually mentioned it has “millions of happy hedgehog customers,” you can bet an underwriter is going to want to review the business before offering them coverage.
The “middle-men.” The people helping customers find the right coverage at a good price in the first place.
Agents typically work for one insurance company, whereas brokers are independent and have the flexibility to shop around across multiple insurance companies on behalf of the customer. And while agents and brokers aren’t typically involved in writing insurance policies, they are pretty great at reading them because they had to actually study this stuff and get licensed in each state they sell coverage. They’re also good at translating dense policy language into humanspeak, because they are helping the insurance buyer consider trade-offs between policy-products all day long.
The last person an insurance policy is written for reading is the buyer of the policy, or “the insured” as insurance people sometimes say. (For tech people, if you thought “user” was bad as a label for your customer, imagine referring to them as “the insureds.” 😐)
Making legal, insurance policy language readable by humans outside the industry is a lot of work. Maybe it’s work that could be done quickly by AI, but it would have cascading impacts on agents, brokers, underwriters, lawyers, licensing, understanding and describing policy tradeoffs, and the way different policy products fit together. (Remember the “cheese holes” from the last part in the series?)
That work is only worth doing in full if you believe that any regular person on planet earth actually wants to read an insurance policy. And after 7 years designing insurance and insurance-related products, and personally clicking “Agree to the Terms and Conditions” without reading the new Terms and Conditions, that is not something I believe people actually want to do.
I call this a “Goldilocks problem” because - remember Goldilocks and the three bears? It’s a casual fairytale about breaking and entering, that repeats this “too hot, too cold, just right” line. There is a “just right” amount of effort worth putting in to making a policy document easier to read for an insurance buyer, and that can enable insurance coverages to be presented more simply on a quote.
But given the customer probably isn’t gonna read the policy anyway, that effort is better placed in other key customer-facing touchpoints - applications, quotes, and claims - where they get simple summaries about what’s covered, and spend the majority of their time with your product.
Next up, we dive into applications, something a customer definitely cares about.
Carrie
PS: If you want to get into a conversation about what the “just right” amount of effort might entail, ping me. But it’s way too in the weeds for an Insurance Onboarding series.
GASP. Take a sneak peak at post 6!
The Application is the Product; Make it Simple, but Maybe Not So Short
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February 29, 2024
Can you imagine building a successful business selling a product that people ignore? Shipping them a package that they never open? That’s insurance. And immigration. And taxes, permitting, licensing, and more. In industries with middle-men where the customer is primarily pursuing a
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