Key Consumer Complaints Against Insurance Companies

Complaint 1: Opaque Claims Management Process

It is no surprise that insurance companies are not liked by consumers. People unconsciously understand that the insurance company has interests that are at odds with its customer. Whether justified or not, consumers sense that insurance companies prioritize profits over customer well-being.

. There are reports that these efforts are exacerbated by the use of AI to minimize payouts of legitimate claims. When asked, underwriters would respond that there is just as much fraud on the other side and insurance companies are just trying to stay solvent as any for profit business would.

Examined rationally, such an argument makes sense. Insurance companies are after all for-profit businesses (stock insurance companies) or run by for-profit management (mutual insurance companies), and for-profit businesses exist to maximize profit.

Perhaps the answer is to minimize the profit motive or to remove it from the practice of insurance altogether? This is what Takadao proposes to do with its technology.

Complaint 2: Pricing and Affordability

Another common complaint is that insurance is expensive and increasingly unaffordable. This is especially the case with high risk assets and is being felt acutely in the homeowners insurance industry. In recent times, homes in areas with wildfire risks have become nearly uninsurable.

However, . This brings up the problem of access or lack thereof to affordable insurance products globally.

Complaint 3: Lack of Global Access

Billions of people globally are uninsured or underinsured, be that in life, health, property or other basic insurances. There are several reasons for this.

The Unbanked

As a financial vehicle, insurance relies on banking infrastructure to operate. The ability to move and invest funds easily is a core requirement for insurance to exist. According to the World Bank Group, 1.4 billion people are unbanked worldwide as of 2023. Insurance companies don’t service the unbanked.

Profitability and Opportunity Costs

There is a lot of money in insurance and a lot more in untapped markets. However, due to the complexity of the product and industry, it is not a business that the average entrepreneur can start. In fact, that aim to maximize profits. In the event a market is not profitable, the insurance company will exit the market. This is unremarkable as it is normal and expected behavior for businesses. Nonetheless, this leaves billions of people uninsured or underinsured. To make things worse, insurance companies will not only avoid unprofitable markets, they will also exit less profitable markets in lieu of pursuing highly profitable markets.

Regulatory Capture

Because insurance pits a for-profit company against the retail consumer, regulations are necessary to protect consumers from companies with far more resources and intelligence. However, insurance companies are extremely wealthy and can exert pressure on regulators to keep new entrants out. Governments depend on insurance companies to buy government issued debt and have very direct interests in keeping insurance companies happy.

The result are regulations that make it extremely difficult for new startup companies to emerge to challenge the status quo, solidifying the position of existing insurance oligopolies and reinforcing the lack of global access to insurance.

Complaint 4: Lack of Transparency

Insurance industry operations are among the most opaque and misunderstood in history. The average consumer will struggle to explain how their insurance policy works or how a claim is adjudicated. Whether intentional or not, this opens the door to abuse and mistrust that can manifest in unjustly denied claims, overpricing, denial of coverage and even unfair distribution of dividends in the case of mutual insurance companies. To make matters worse, the insurance industry has its own accounting rules which a non-insurance accounting professional will struggle to understand.

While transparency feels aspirational and a “nice to have” feature in many industries, it’s absolutely necessary in the insurance industry where company and customer interests are at odds. While regulations aim to address this, even the most well-intentioned regulator cannot keep up with the workload to supervise and audit a $9 trillion dollar industry.

That’s where the blockchain and the Takadao technology steps in to help crowdsource oversight and to open up governance to the average policyholder.