Last month, insurance educator Chris Kendall, CPCU, ARM, et al., posted some results of a survey of 2,000 U.S. homeowners on LinkedIn. Conducted or commissioned by Goosehead Insurance Inc., one of the most revealing statistics was that 65% of policyholders agreed that they “have no idea what my home insurance fully covers.” This tracks with a similar survey conducted by Plymouth Rock Home Assurance in 2020 which found that about 70% of U.S. homeowners aren’t sure what their home insurance covers.
Why Is This?
I suspect that two of the primary reasons are, first, that insureds don’t read their policies and, second, the insurance industry speaks publicly far more often about price than coverage.
One only needs to consider the proliferation of “Save 15%!”-type advertising that dominates the media to confirm premise number two. This focus on price leads the public to believe that insurance is a commodity differentiated only by price, so why bother to read policies, because they all cover the same thing.
That said, I’ve noticed in recent years that insurers seem to be focusing their advertising more on coverage than in the past. In general, it’s a good thing to tell consumers in your television advertising that “Your cut-rate insurance may not pay for this.” The problem, though, is that all too often the coverage information is provided in the form of misinformation. To illustrate, consider the following examples.
Most recently, a holiday commercial featured on television had an actor posing as a rodent whose comical hijinks unleash mayhem in a home, resulting in extensive damage. While there may arguably be some coverage under the specific scenario presented by this commercial, consumers might be led to believe that ALL losses involving rodents are covered, when that is not the case.
The same insurer also had a commercial implying coverage for damage caused by raccoons. Their open perils policy appears to cover this but not their named perils policy. In the case of other insurers, if they are using a current ISO open perils homeowners form, there is an exclusion for damage resulting from infestation or secretion by animals.
This insurer has a more recent TV commercial where the principal actor is directing the parking of cars at an event for a $3 fee, resulting in damage to several of them. He says you may not have coverage if you have a cut-rate auto insurance policy, implying that the subject insurer’s policy does cover the parking of autos for a fee. In reviewing a copy of their auto policy I happen to have, however, I don’t see the coverage. In fact, there is an exclusion for losses arising from business operations involving the parking of vehicles.
In another commercial by this insurer, a sports referee trying to escape an angry mob deliberately drives his auto through fences, shrubs, etc. His auto policy covers damage arising from “accidents.” Is the damage he caused truly accidental?
Maybe. Maybe not. But one would think the insurer and advertising agency could come up with a better example of coverage relative to “cut-rate” policies.
Another insurer that, to its credit, also focuses its TV advertising on coverage has a commercial where a gopher “steals” a diamond ring from a picnicking human to give to his gopher fiance. The commercial indicates that this was an actual claim covered by the insurer on April 26, 2014.
Based on my own portfolio of homeowners forms, this insurer has forms that clearly do not cover this type of loss. Most policies either exclude loss caused by rodents or, if they cover theft without such an exclusion, courts have pretty consistently found that animals can’t “steal” property.
This insurer has a couple of other animal commercials, one involving dogs that cause a fire and another where dogs open a sink faucet, resulting in extensive water damage to a home. The policies of this insurer that I have reviewed exclude damage caused directly “or indirectly” by domestic animals. While it’s possible that these claims could be covered, depending on specific circumstances and any governing statutory or case law, again the possible implication is that damage caused by dogs you own or keep is covered when this is usually not true.
Last year, someone on LinkedIn posted a link to an insurer’s TV commercial that involved drag racing. The commercial has apparently been removed from YouTube, thankfully, since consumers could easily presume that auto policies cover racing when, in fact, they universally exclude various forms of racing unless such exclusions are prohibited by regulators.
While most insurer TV commercials focus on personal lines, those that address commercial exposures all too often don’t fair any better when it comes to coverage accuracy. For example, one insurer that was advertising their entry into commercial lines illustrated coverage under their CGL policy by showing a worker dropping and breaking a glass window during installation. The ISO CGL policy that this insurer was allegedly using has at least three exclusions that could apply to the damage.
The same carrier, advertising that they now offer workers’ compensation insurance explained that, “Workers’ comp helps you pay for a replacement” worker for an injured worker. What?
Aside from misleading the public, this brings me to the main point of this month’s column. Do insurance company marketing and advertising departments ever consult with their claims departments before signing off on advertisements that feature policy coverages offered by the insurer? Do insurance company underwriters or claims reps who know the products their employer is selling ever advise the home office that their current TV commercial might mislead their insureds into believing they have coverage for something they don’t?
Would a court find coverage for a claim clearly not covered based on policy language but arguably covered based on misleading advertising an insured allegedly relied on when purchasing the product? Perhaps not, given that so many courts often view advertising, especially slogans and assertions, as “puffery.” But it’s conceivable that regulators could have a problem with it.
Tune in next month when I discuss these coverage issues.
WRITTEN BY Bill Wilson Wilson, CPCU, ARM, AIM is the founder and CEO of InsuranceCommentary.com and the author of the book "When Words Collide: Resolving Insurance Coverage and Claims Disputes." His column, "Is It Covered?", is published in Insurance Journal Magazine.