“Insurance is a Scam”

I love TikTok, but that’s not what this blog post is about. This post is about a TikTok trend that planted the seed for the basis of this blog post. It’s called the “I’m bored, tell me” trend. The prompts look something like this:

I’m bored, tell me the most unhinged thing you did to get out of debt…

I’m bored, tell me the worst thing a “friend” has ever said to you…

I’m bored, tell me the best piece of career advice you’ve ever received…

I came across one recently that read, “I’m bored, tell me something about your industry that most people don’t realize…”

My response:

Insurance isn’t a scam. People just don’t understand what they are buying. But the FACT that they don’t understand is due to the industry’s incredibly poor efforts to educate consumers. And that lack of transparency certainly feels scammy.

Oh boy. I got a lot of DMs about this. I won’t list them here, but I do want to talk about it.

There are many lines of insurance that are regulatory. Own a car? You need auto. Buy a home? You need homeowners. Own a business with employees? You need workers’ comp. Are you a business who wants to respond to an RFP? They may have insurance requirements for liability, cyber, etc.

As a result, carriers market to consumers based on cost savings, because they know consumers are buying insurance because they have to.

“We’re the cheapest!”

“Save 15%”

“Save MORE when you bundle”

Since insurance requirements can be regulatory, consumers want to meet the regulation by spending as little as possible.

Occasionally, carriers market the value of coverage, but the description of said value is vague and ambiguous. Like a good neighbor, [REDACTED] is there.

Here’s how you (and ALL consumers) need to view insurance:

You have things. Home, car, businesses, etc. You like those things. You need those things. Bad things (fire, theft, lawsuits) may happen to YOUR things. Do you have the money to fix all of the potential bad things that may happen to the things you like/need?

No?

Ok, no worries. There are insurance companies who will provide you some money to fix/replace the things you like/need when bad stuff happens.

But, but, but…there’s a lot of bad things that can happen, and your things are expensive. So they’ll cover some of the bad things, not ALL of the bad things.

And they’ll give you money to fix/replace your things, but not unlimited money. Don’t be ridiculous. They’ll have a cap.

The first part is called exclusions. The second part is called limits.

You pay a premium and we provide coverage.

Oh, the premium is expensive, you say? Don’t sweat it, we can work with you. You can pay a larger deductible, or lower your limits, or consider a policy with more exclusions. We are flexible. And the choice you make should be based on how much risk you, as a policyholder, face, as well as how much you can afford in premium and deductibles.

These are not the messages delivered in insurance commercials, but they SHOULD be. Otherwise, policyholders only learn about exclusions and limits AFTER they file a claim.

To all my insurance nerds out there, YES, I understand there is more nuance than this. Please delete the paragraph you were about to send me. The point is, most policyholders were never taught the basics. You teach a kid the ABCs before you drop a copy of War and Peace into their lap. Same goes for policyholders. Let’s see some meaningful consumer education, and give the emus and geckos a rest.