Is perception really reality?

As you would probably guess I am a avid reader on all things insurance and I am part way through a new book written on one Insured’s view on the performance of the insurance industry. The book is titled “The Christchurch Fiasco – The Insurance Aftershock and its implications for New Zealand and beyond” by Sarah Miles.

I have not finished the book but my initial reaction is that it is very well written and most of the points she makes are valid.

After the Brisbane floods the insurance industry was also heavily criticised culminating in Choice Magazine awarding the insurance industry a 2011 Shonky Award. I was quite angry about this and wrote to them, posting comments on this blog at the time. I also went on TV and radio, wrote articles and 2 books trying to get a positive message across.

My concern was, and still is, that due to a combination of all this bad publicity, increasing premiums, a tough economic climate for many home and business owners and an unhealthy dose of “It will never happen to me!”. we will see lower levels of insurance. That is just what we have today. Acccording to a recent study by Roy Morgan 15% fewer businesses insure for property losses in Queensland. Insurer and brokers also record drops in vital covers like business interruption which is being shed even when the basic fire and perils cover is being retained.

While I felt in my heart, perhaps misguidedly that the industry was being unfairly treated in Queensland, I am not so sure that Ms Miles in not correct in New Zealand. Our office has too many valid claims where clients have come to us after receiving the run around by their insurer. When I read phrases such as insureds being subjected to  ” financial rape”, I was embarrassed to be part of our industry as I know that in some cases that is exactly what is happening.

Ms Miles picks up the issue of depopulation early in the book, another position that I share with her.

Another point she covers well is the difference in attitude of insurers from the days of mutuals to the financial structure of  insurers of today. She also has a good hard look at reinsurers but I have not made it to that chapter as yet.

The book is being read by politicians, the media, and insured’s looking for answers. The question is: is Ms Miles giving the right ones? I think the book is well worth a read and you can make up your own mind if these are the rants of a disgruntled insured or much much more.

I keep remembering the fact that after the US$6 billion, in today’s money, earthquake losses in the 1906 San Francisco, the then head of Lloyd’s, Cuthbert Heath gave instructions for valid claims to be paid quickly and fairly. This gave Lloyd’s in particular and insurance generally a great name which paid dividends to the Lloyd’s brand for the next century.

Are we witnessing the exact opposite happen now? Will we see a whole generation in at least 2 countries question the value of general insurance?