Insurance is just a legal contract between the insurer, who promises to pay for a covered loss, and the insured, who promises to pay premiums.
Pull out one of your insurance policies and read the definition of “covered loss.” Copy the definition into a Word document.
Now look at the capitalized, italicized or bolded words within the sentences. Those words are defined terms. The definitions will be found within the policy itself or a referenced statute.
Now replace every defined term in your covered loss paragraph with the actual definition. This will likely triple the length of the paragraph.
Now look at any exceptions stated in your policy. Go back and insert each exception in the relevant location within your covered loss definition. You may have to insert an exception more than once if it applies to more than one provision.
One last exercise. Read every insurance case opinion and statute, federal and state, that has been published in the last 100 years, discern which are still good law and incorporate them into your modified covered loss policy. Finally you have a comprehensive covered loss provision.
Impossible, you say? Of course it is. No wonder one of the top complaints about insurance is that it is simply too confusing. Other common complaints: the policy is too expense, insurance companies delay or deny claims for specious reasons, insurance companies low-ball settlement offers, it is too easy for an insurer to game the system, insurance is a cash drain for most people and businesses, and the insurance policy will not cover a catastrophic event such as a hurricane or pandemic.
Folks, we may have a solution. It is called “insurtech.”
What is Insurtech?
Insurtech is insurance offered as a digital product. It makes sense because insurance does not require a huge operating plant or supply chain, it can be sold via a website or mobile app without a salesperson and the market is huge so even a small slice can translate into huge dollars.
New insurtech companies are being formed at a rapid pace. They come with consumer protections because a company must be licensed in every state in which it sells a product. Each product must the requirements of that state. They also come with a much better customer experience. Insurtech companies offer a streamlined digital process from start to finish: client portal, application, approval, signing, premium payment, claims, settlement offer, and claim payment. The companies are able to quickly implement changes to existing products, expand product lines and market new products. There are no delays occasioned by agents on vacation, sick or out on leave. Product and claim questions are answered via app, email or client portal almost immediately.
For examples of what some insurtech companies look like, see Clearcover (auto), Lemonade (home), Ladder (life) Oscar (health wellness incentive) and Next Insurance (business, professional liability, workers’ comp).
The surge in insurtech products should force changes to the stodgy insurance industry, mandate removal of barriers to entry by new companies, and lead to a change in regulations. Impossible? That is what the taxi companies said when Lyft and Uber drove onto the scene.
Friendly and understandable insurance policies? Now that is progress.
Virginia Hammerle is a Texas attorney whose practice includes estate planning, guardianship and probate. Sign up for her newsletter at firstname.lastname@example.org. Contact Hammerle Finley Law Firm to schedule a consultation at hammerle.com.
This column does not constitute legal advice.