Knowledge is Declining and AI is Not the Answer

I was working with an agent regarding coverage analysis. They advised me that my interpretation was wrong because they “asked AI and it gave a different answer.” I asked them if their AI tool interpreted a generic form, ABC company’s form, or the actual form in question. For some reason or another, it did not dawn on the agent that the only form that mattered was the one in question.

Similarly, I read a case a few weeks ago where an appellate court threw out an insurance company’s claim denial because it used a generic form to defend itself rather than its own form.

I was teaching a class a few weeks ago, and a producer got upset upon learning about a case law that has been case law for at least 50 years. I was left wondering how in the world this smart, experienced, and supposedly “educated” producer did not know something so basic.

The insurance industry is incredibly technical in law, language, and, in some ways, finance. How can knowledge levels be so poor? Producers know less today than they did 30 years ago. And the idea that anything can be looked up is fueling ignorance. Beyond laziness, why are incompetence and ignorance attractive?

First, incompetence is cheaper. I was reading a story about how a large carrier had retooled their claims department with adjusters who were “good enough.” I don’t know how to define “good enough,” but I know it is cheaper than hiring excellent adjusters.

Second, some carriers and agencies have recognized that humans may trust someone they know is probably incompetent and even stupid more than they would trust someone who is very smart and knowledgeable. When an uncovered claim happens, does it matter to the injured party if it was caused by incompetence or malfeasance? No. Maybe five years later in litigation, but not much even then in the real world.

But it does matter at the point of purchase. If a buyer trusts an incompetent person not to purposely mislead them, that is psychologically safer than trusting someone smart enough to mislead them. This is the basis of so much insurance advertising that employs ludicrous characters and messages that demean the real value of what insurance does when provided by competent people.

And some of these not-so-competent people generate an amazing level of trust. I remember a producer with a movie-star grin. He should have been in toothpaste commercials. His sales were great, and every policy he wrote was wrong. The agency had to cut his commission to pay for someone to clean up all his messes. And yet customers loved him and that smile!

If it is cheaper to employ ignorance, to not pay for training/education, and ignorance conveys trust, why not downplay competence? That is a valid question. The answer is that the situation will continue to get much worse unless carriers recognize that knowledgeable insurance people do generate more value and/or regulators recognize the existing customer standard of care, where the insured must read and understand their policies, is one of the most ludicrous legal standards in the entire code.

Until then, assuming you care and believe knowledge has value, what is the solution? Create a boutique organization that goes far beyond placing insurance. Placing insurance is designed for incompetence. Professionals cannot beat ignorant people at that game. Give it up.

The new business model must put a price on quality professional advice. The advice can be as simple as actually identifying clients’ exposures to their coverage solutions or as complex as ERM/TCOR or alternative market solutions. My clients who take this path have more fun and make more money. They have less stress, and they experience fewer aggravations.

Let me know if you want to embark on a more fun, more financially rewarding career. Don’t call if you want to keep trying to win against ignorance. 

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NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.

None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.