Welcome back from the holidays and Happy New Year.
For the last dozen-plus posts we’ve been talking about the challenges related to bridging gaps between restorers and insurers, and for that matter, all parties involved in a property-related claims ‘transaction’. We’ve itemized challenges, identified barriers, and discussed facts. Now it seems appropriate to offer up solutions.
From my perspective, there are potentially many solutions, but for now I want to discuss two. Here is the first:
Solution #1 – HMO and PPO Policies
For nearly 20 years, I have been an advocate for HMO and PPO policies in the auto insurance world, and for 10 years, I have been an advocate for a similar structure in property. The impetus is not related to cost control; it is all about expectations.
When consumers buy health insurance, they generally know exactly what they are buying. The biggest reason is because of our general familiarity as consumers with the health care process; we use the system frequently. So before a consumer buys a policy, they check doctor lists (is my doctor in the network?), hospitals, co-pays, exclusions, etc. There is virtually never a surprise over which doctors a consumer can use or what will be covered.
However, whenever consumers buy auto and property insurance, and especially property, they generally have no idea what they are buying. They are generally ignorant about the claims process and they have usually never read the policy. Most people experience an insurable loss (a car accident or property damage) once every seven or more years, so even if they have had a previous claims experience, it is likely they have forgotten the details about it. Thus most claims events are procedural surprises with significant differences between expectations and reality. By then, it is too late to fix the expectations damage that has been done.
By offering two types of policies in property – one in which a policyholder must use a restorer within the insurer’s network (an HMO policy) and one in which the policyholder can use any restorer he wants without pressure (a PPO policy) – the purchaser will know what to expect upfront. They can pay less and have fewer choices or pay more and have greater choices. By taking this approach, we could eliminate all the anti-steering legislation and complaints about insurers “influencing” policyholders because each purchaser would have a clear, overt choice upfront when he buys. There would be no need for any alleged “steering” and no soapbox speeches about consumer choice.
Restorers would also have a clear choice. Each restorer could evaluate each insurer’s HMO program and determine if they wished to pursue participation. If they should choose not to, they would still have equal access to all the PPO policyholders of that same insurer.
Unfortunately, as effective as this idea may be, implementing this approach is out of the hands of restorers and the insurance claims community. This idea solely rests with an insurance company’s product management team and underwriting department. Until those folks can get their arms around the concept, we will be left with the confusing, one-size-fits-all property insurance policy we have today.
(To be continued…)