Ethics and Insurance Claims – Part 1 – Information Asymmetry (2 of 2)

This is the second part of a post about the influence of information asymmetry on ethics and insurance claims.

Let’s look at some examples of how information asymmetry can influence the insurer and claimant relationship. Firstly, the policyholder may have read the policy, but they are unlikely to have really understood it. There’s nothing unusual in this – we take medicine, but rarely read (let alone understand) the information slip tucked in with the bottle. So when insurers complain about insureds not understanding what they’ve bought, those insurers are in fact voicing a lack of understanding of their customers and of what their own role as professionals really means.

Secondly, policyholders usually have little to no understanding of how the claims process itself works. This is exacerbated when insurers have created claims supply chains of some complexity. So even if a policyholder has spent time reading her policy and made an effort to understand how the policy might deal with her claim, she then finds herself in the middle of an often bewildering process that deflates her confidence and puts her on the defensive.

Thirdly, the claimant may know many things about the loss they’ve suffered, but they may not fully appreciate what those things mean within the context of their claim. They’re not motor technicians, nor builders, for example. The insurer needs to proactively engage with the claimant about the information they need to assemble, what next steps need to be taken and who will be providing them with what service. Those insurers who approach this in a positive and supportive manner are much more likely to win the trust of the claimant (and get their job done more smoothly), than those who leave the claimant to work it out for themselves.

Let’s stick with that last example a little longer. There is of course an asymmetry of information about the loss, with the claimant knowing far more than the insurer. Every profession faces its own version of this situation and each of them uses their training and experience of many such similar situations to draw out the essential information and rebalance that asymmetry – think of the doctor and patient, and the lawyer and defendant. While it’s important to bear this particular asymmetry in mind, it’s also important not to trade one against the other. Information asymmetry will always have much greater implications for the claimant than for the insurer.

Each insurer will have a process map for how their claims function should progress the claims they receive. From the beginning to the end of that map will lie a series of touchpoints at which the insurer’s claims process can engage with the claimant in a way that respects that information asymmetry. Examining those touchpoints from the point of view of fairness, professionalism and ethics will establish how effectively that is actually happening.

Ethics is being increasingly associated with a firm’s capacity for innovative thinking (see this post). Examining the claims process for ways in which information asymmetry with the claimant can be neutralised will be one of the best ways of tapping into your firm’s capacity for innovative thinking, for it encourages critical thinking around what can often be an overly familiar process. Think of it this way and you have not a stone you need to push uphill, but a platform for rolling forwards on.

In the next post in this series about ethics and insurance claims, I’ll being looking at compensatory justice.