Meaningfully Shopping for Insurance is Next to Impossible

Anybody who cares about consumer rights should take a look at this recent article by Professor Dan Schwarcz, a law professor and insurance expert from the University of Minnesota Law School. This guy actually gets his jollies reading insurance policies, and what he has learned can help you. Well, sort of….. In reality, what he has learned can educate you, anger you, and hopefully motivate you to help solve a tricky problem, namely that consumers don’t generally get to see their policies until they’ve signed on. Policy terms also vary a lot, but no one seems to know this. It is a classic case of consumers shopping solely on the basis of price, when other things like coverage matter more. According to Professor Schwarcz, consumers have access to virtually no information about the things that matter most in an insurance policy. 

The New York Times blogged about Professor Schwarcz’s recent article shortly after we briefly discussed the article here on Credit Slips. Read the blog if you don’t have time to read the article. The NYT blog quoted Schwarcz, giving a great example of a coverage differential that could matter. Let’s say a standard contract insures a home against risk of “direct physical loss to property,” but some insurers alter the language to cover only “sudden and accidental” direct physical loss to property. The new wording could be used to deny claims for vandalism or from a threat that grew over time — say, an old tree that weakens and eventually falls on a house. It’s conceivable, he said, that the language could be used to deny claims for theft on the grounds that the loss wasn’t “accidental.”

Professor Schwarcz is now urging state insurance commissioners to post contract language online, so consumers can compare policies. Curious myself about how much I could learn about actual policy terms and coverage on line, I did a few test searches this afternoon while doing other things. How much did I learn? Not much, and now I am now getting spammed endlessly by insurance companies while trying to do, um, other things…like…..search for crust-less quiche recipes.  The recipe site was wrapped in all sorts of insurance ads.  Then…searching for lodging near Ghost Ranch (hope my dean is not reading this), more insurance ads along the side! Information is scarce, but there is plenty of spam.