How to Shift Insurance Buying Beliefs Before the Next Disaster

Even though natural disasters are on the rise, homeowners aren’t making changes in how they buy insurance – or how much coverage they buy. It comes down to a problem in buying beliefs – so how can we shift those beliefs? Three words: educate, educate, educate.

Buying patterns: what’s the norm?

Let’s start with some good news. According to an ORC International poll for the Insurance Information Institute, 95 percent of homeowners (about 70 million homes) are already insured in the U.S.

When it comes to coverage amount, however, unfortunately the norm is “underinsured.”

“While most people have home insurance, many lack flood insurance, which is typically purchased from the U.S. government as a separate policy,” reported the Wall Street Journal. “Many homeowners also have home-insurance policy limits that are too low to cover the full cost of repairing or rebuilding their properties.”

Disasters are on the rise

We don’t have to rattle off a list of disasters to show how important this is – although we certainly could. In 2017 there was Harvey, Irma, Maria; California wildfires; and earthquakes, fires and floods across the globe. This year, it’s more of the same.

And it’s no fluke. According to the International Disaster Database EM-DAT, which records detailed information dating from 1900, disaster frequency has risen steadily since 1960, with a dramatic spike at the turn of the millennium.

Now, most homeowners know that catastrophe is an increasing risk, and they worry about it. So that means they’re upping their coverage, right? Wrong.

The norms aren’t changing

According to a Clearsurance survey, while 87 percent of respondents expressed concern about natural disasters, only a few took any steps to increase their existing coverage or buy a new policy. Even when last year’s catastrophes were dominating headlines, as many as 42 percent of survey respondents didn’t even check their coverage for gaps.

It seems there’s a disconnect between what a policy actually covers, and what a homeowner thinks it does. If homeowners buy insurance to attain peace of mind, you could say that right now, as many as 65 percent are feeling just a little too peaceful.

There are three ways to address that with your customers: educate, educate, educate.

How to build a “new normal”

1. Educate them about insurance. According to an Insurance.com survey, homeowners are remarkably uninformed about home insurance: what it covers, how it works. If customers were solid on this layer, chances are they’d be motivated to monitor their policy and get the coverage they need.
2. Educate them about risk. Fear is a strong motivator, and in today’s (literal) climate, the fear of natural disaster isn’t a bogey but a well-founded concern. Prompt your customers to check for gaps by connecting that action to the emotional realities that go with it. From a psychological standpoint, you’ll be making a strong case.
3. Educate them about options. Be your customer’s ally. Problem-solve. Walk them through options, ask questions to help them determine the right coverage amounts, and focus on meeting needs instead of closing sales. Insurers who come alongside their customers in this way are better at establishing trust. Doing so not only raises your bottom line, but also increases retention.

Of course, if you’re not selling direct, you must provide this education through your broker network. Some agents could be under-selling to keep premiums more competitive, so you’ll need to embark on a broker educational process as well. This may also be a good time to consider a direct-to-consumer sales program.

If your policy administration system doesn’t support direct-to-consumer sales, talk to Silvervine.