The INSURTECH Book

Why is Insurance Failing?

By Steve Tunstall

CEO and Co-Founder, Inzsure

The insurance industry provides amazing support to individuals, families, and businesses, often in their darkest times. Society truly benefits enormously from the proper running of the insurance sector. However, the benefits of insurance provide no immediate gratification to the purchaser. I will explain how the insurance community has historically addressed this issue. I will go on to consider why this has led to systemic weaknesses across the whole sector, which may now jeopardize an industry that I love – unless these challenges are addressed.

The Challenge

There is no tangible product delivered within most insurance transactions. The most risk averse individuals will buy it. The least risk averse will self-insure. However, no-one really wants insurance until they really need it. The customer only buys trust – or a promise of trust when times are hard. This tempts intermediaries to sell insurance using the tactics of fear and commoditization. Front-loaded commissions can lead to a tendency to secure sales irrespective of need. This propensity may lead to misrepresentation; it leads to dissatisfaction; temptation leads to fraud; suspicion and a breakdown of trust lead to dysfunctional claims systems; and so it goes. The cycle of fraud in the industry has undermined the true benefits of insurance for a long time.^1,2 The industry has no product other than trust. There is nothing else to take away from ...