7 things insurance companies are horrible at
Insurance is a lifesaver when it works the way it should -- like when a health plan covers vital cancer treatment or a home insurance policy pays to rebuild a house that has burned down.
We love insurance at times like these. But the industry has plenty of bad days, too. Here are seven things that insurers don't do well.
1. Keeping young customers happy
The auto insurance industry’s youngest customers also happen to be the least satisfied and most likely to shop for a new company when they feel slighted, according to a 2010 study by J.D. Power and Associates.
Generation Yers (born between 1977 and 1994) want email updates about their claims and answers to their basic questions. Um, don’t they know insurers aren’t big on email? A quarter of Generation Y customers prefer being contacted by e-mails, yet only 13 percent reported getting e-mail updates about their claims.
Also, 16 percent said they didn't get their basic questions answered when they reported their car insurance claims, twice the percentage of baby boomers who reported unanswered questions, according to J.D. Power.
Looking for an auto insurance company you can love? See who ranks highest in the most recent J.D. Power study.
2. Using social media effectively
Insurance companies want you to “like” them on Facebook and follow them on Twitter, but many haven't quite figured out how to tell their stories online, much less make you a fan.
Among 50 social-media savvy industries, insurance came in at 42, according to a fall 2010 ranking by NetProspex, a New York-based firm that helps companies find business-to-business sales prospects. The company mined its database of contacts and analyzed employees' use of social networks, such as Twitter, LinkedIn and Facebook.
It could have been worse. Funeral homes ranked No. 50 and some industries, such as health care, didn't even make the list
3. Finding deceased life insurance customers -- they don't even try!
Life insurance companies are under fire from state insurance regulators for not trying hard to enough find beneficiaries. Here’s why your life insurer doesn’t care if you’re dead.
The insurers routinely use a Social Security Administration database called "Death Master" to identify annuity owners who died -- so they can stop making annuity payments. But when it comes to finding life insurance policyholders who died, insurers tend to turn a blind eye. Florida and California insurance regulators have launched investigations, and the New York insurance department recently told life insurers to start finding beneficiaries right away.
4. Paying health insurance claims and getting them right
The largest health insurance companies in California are putting the “Denied” stamp on more than 25 percent of claims, according to a report released in February by the California Nurses Association/National Nurses United. The denial rates were based on data from the California Department of Managed Care for the first three quarters of 2010.
Nationwide, health insurance companies have a whopping 19.3 percent error rate in processing claims, according to the American Medical Association's fourth annual National Health Insurer Report Card. Eliminating the mistakes would save $17 billion in administrative costs, the AMA says.
5. Revealing exactly how they calculate your auto insurance rate
It's no secret your ZIP code, gender, credit history, type of car you drive, marital status and claims history all influence your car insurance premium.
What you never will know is how much weight insurers place on each factor.
6. Figuring out which claims are fraudulent
Insurance fraud is a $30 billion a year problem, according to the Insurance Information Institute. That's how much property insurers pay out on fraudulent and exaggerated claims. Just as new laws and procedures are implemented to combat fraud, crooks figure out new ways to game the system.
7. Getting people to understand what insurers are talking about
Consumers think insurance is among the most complicated industries. No argument here.
Rather than appreciating the safety net insurance offers, consumers find products confusing and full of complicated jargon.
A survey by Siegel + Gale, a New York-based branding firm, confirmed our worst suspicions: Insurance policies are written in gibberish. Insurance companies ranked near or at the bottom of its Brand Simplicity Index.
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