Insurance: A Necessary Evil?

Many people dislike insurance because they find it complicated, untrustworthy, and unreasonably expensive. The jargon used in insurance documents is often confusing, and some people feel that insurance agents are only interested in making money rather than helping customers understand their policies. Additionally, insurance is seen as a financial burden, as people pay premiums for something they may never need or use. People also dislike insurance companies because they believe they are bullies and reject claims to maximise profits. The industry has a reputation for insensitive decisions, such as increasing premiums after a claim or life event, which can give the impression that insurers are parasites on the economy.

Insurance is complicated and hard to understand

The complexity of insurance products can be attributed to the fact that they are typically written by lawyers and insurance professionals, catering to their own understanding rather than that of the layperson. This disconnect between the creators of insurance policies and the general public contributes to the perception of insurance as a complicated and inaccessible topic.

The lack of transparency and understanding in insurance can lead to distrust and a negative perception of the industry. People may feel that insurance companies are out to get them or that the system is designed to be confusing and unfair. This complexity also makes it challenging for individuals to make informed decisions about their insurance choices, leaving them vulnerable to making costly mistakes or being taken advantage of.

Furthermore, the intangible nature of insurance adds to the challenge of understanding it. Unlike physical products, insurance is a promise of protection against future risks and uncertainties. This abstract concept can be difficult to grasp, especially when there is no immediate return on investment. People often struggle to see the value in something they cannot physically touch or experience until a claim is made.

While insurance agents and brokers are meant to act as intermediaries, even they may struggle to comprehend the intricate details of certain policies. Their role is to sell products and make a profit, which can create a conflict of interest when it comes to educating their clients. As a result, individuals are left feeling confused and uncertain about their insurance choices, contributing to their dislike of the industry.

Insurance companies cannot be trusted

The complicated nature of insurance policies doesn't help. With numerous technical terms, jargon, and legal language, insurance documents can be challenging to understand without an agent or broker's assistance. Unfortunately, some agents and brokers themselves may not fully grasp the terms, focusing more on making sales than educating their clients.

Insurance companies have a reputation for putting profits first. They are reluctant to release funds to policyholders, carefully scrutinizing claims to avoid paying out. This reluctance to pay out, combined with complex policy language, can lead to feelings of betrayal and exploitation among customers.

Additionally, insurance companies have been known to raise premiums after a policyholder makes a claim. This practice further reinforces the perception that insurance companies are more interested in their bottom line than supporting their customers.

The negative perception of insurance companies is so strong that they are often described as ""an affiliation of pirate-gamblers" who accept bets (premiums) with non-negotiable terms, only to argue and delay payments when claims need to be settled.

While there are honest and hardworking individuals in the insurance industry, insensitive decisions and actions by some insurers tarnish the reputation of the entire sector. Ultimately, the public's distrust of insurance companies stems from a combination of complicated policies, negative experiences, and a perception of profit-driven behaviour.

Insurance is unreasonably expensive

The high cost of insurance is often attributed to the intangible nature of the product. Unlike physical goods, insurance is a purely financial arrangement that offers peace of mind by mitigating the risk of rare but extreme hazards. However, the price of this peace of mind can seem excessive, especially when compared to the likelihood of needing to make a claim.

For example, car insurance premiums have been soaring in recent years, with rates rising over 20% in the year through March, the fastest pace since the 1970s. This is due to a combination of factors, including supply chain disruptions, advancements in vehicle technology, and an increase in severe accidents. The cost of electric vehicle (EV) batteries, for instance, can be astronomical, and insurers are struggling to keep up with the evolving risks and repair costs associated with these new technologies.

Another factor contributing to high insurance costs is the business model of insurance companies. Insurance providers are profit-seeking enterprises that aim to maximise returns for their owners. As a result, they are often reluctant to release funds, carefully scrutinising claims to avoid being taken advantage of. This can lead to a perception of insurance companies as bullies or pirates, as reflected in the Urban Dictionary definition:

> "An affiliation of pirate-gamblers who accept bets called premiums. The dollar amounts of the premiums are non-negotiable, but the amounts of the claim settlements, should the company lose the bet, are rarely delivered without argument."

Furthermore, insurance companies often raise premiums when a policyholder makes a claim, even a small one. This is because they believe that filing a claim makes it more likely that the policyholder will file additional claims in the future, thus posing a higher risk to the company.

While insurance is designed to provide financial protection, the high cost of premiums can be a significant burden, especially when coupled with the uncertainty of whether the insurance company will pay out on a claim. This lack of trust and understanding between insurance providers and their customers contributes to the perception of insurance as an unreasonably expensive necessity.

Insurance policies are intangible

Insurance policies are often considered to be intangible because they are not physical products. They are a service, and a promise of protection, rather than something that can be touched or demonstrated.

Insurance is a promise to provide financial protection in the event of a disaster or accident. It is a contract that outlines what will be done in the case of a negative event, but it is not a physical product that can be seen or felt. This makes it difficult for people to understand the value of insurance, and it can be challenging to differentiate one insurance company from another.

The intangibility of insurance policies is a key factor in why people dislike insurance. People often feel that insurance companies are out to get them, or that they are paying for something that may never be needed. This is a common perception, and it is difficult to change. Insurance agents have to work hard to build trust and explain the benefits of their specific policies to potential customers.

The lack of a physical product also means that insurance policies are often complicated and filled with jargon. The policies are legal contracts, and the language used is often technical and difficult to understand. This complexity adds to the negative perception of insurance companies, as people feel they are being deliberately confused or tricked.

The challenge for insurance companies and agents is to make the intangible tangible. They must find ways to demonstrate the value of their product and build trust with potential customers. This can be done through clear communication of benefits, providing testimonials and case studies, and offering personalised policies that meet specific needs.

Insurance companies reject claims

Insurance companies are in the business of making a profit, and this can sometimes mean that they are reluctant to pay out on claims. This is one of the main reasons why people dislike insurance companies so much.

There are several reasons why an insurance company might reject a claim. One common reason is that the policyholder has provided incorrect or incomplete information, either during the application process or when making the claim. For example, if a policyholder fails to disclose a pre-existing medical condition when applying for health insurance, the insurer may reject any subsequent claims relating to that condition. Similarly, if a policyholder provides incorrect information about the circumstances of a claim, such as how an item was damaged, the insurer may refuse to pay out.

Another reason for claim rejections is that the policyholder has not complied with the terms of the policy. For example, if a policyholder fails to update their insurance details when their circumstances change, or if they do not follow the correct claims process, their claim may be rejected. In addition, if the policyholder has not taken "reasonable care" to prevent a claim from arising, the insurer may contest this. For example, if a policyholder leaves valuables on display in their car and these are subsequently stolen, the insurance company may reject a claim on the basis that the policyholder did not take reasonable steps to secure their property.

Insurance policies often contain complex and ambiguous wording, and this can sometimes result in claim rejections. Policies may contain exclusion clauses that are not immediately obvious to the policyholder, and insurance companies may use contentious "small print" reasons to challenge a claim. For example, an insurer might dispute whether a lost or stolen item was used for personal or business purposes, as this may affect whether the item is covered by the policy.

Finally, insurance companies may reject claims if they believe the policyholder is exaggerating the value of their claim or trying to claim more than they are entitled to.

If a policyholder believes their claim has been unfairly rejected, they have the right to complain and can follow the insurer's official complaints process. They may also be able to seek assistance from a specialist insurance dispute solicitor or take their case to the Financial Ombudsman Service.

Frequently asked questions