Recently a team of academics based in Austria, Canada, Finland and Norway has begun studying insurance commercials from those countries.[1] Our team includes specialists in marketing and business ethics, as well as a sociologist. We are interested not so much in the effectiveness of the ads in selling, but in the sociological and ethical questions they raise. Here we want simply to make an observation about a problem with current insurance advertising and insurance marketing more generally, and a suggestion for how it might improve.
Some of the several dozen insurance ads we have reviewed, including newspaper and magazine ads and television commercials, could be categorized as scary; more of them are funny. We have not tried to quantify this at all, but it seems to fit with a trend that the Insurance Marketing and Communications Association described internationally in which scary insurance ads were being replaced by funny ones[2]. Because of this we have also begun to take a look at what previous research told us about fear and humour appeals in advertising – simply put, that ads based on fear or humour are not always as effective in communicating as we might think. Frightening ads may even have harmful effects. While fear and humour in insurance advertising can be good at triggering attention and interest, such an emotional focus can hamper rather than further rational understanding and evaluation of insurance. A number of other current insurance advertisements we looked at focus instead on building trust. However, regardless of their approach, there is one thing we are finding that insurance ads have in common. Whether they focus on fear, humour or trust, most insurance advertising contains very little specific information about insurance itself.
The ads, being fairly empty of information, contribute to a more general situation where many consumers pay little attention to the specifics of their insurance and know little about it. This has led us to think about how insurance advertising could help work towards customer education, and thus build trust from informed consumers. Advertising could actually teach consumers rather than merely scaring or amusing them, or simply creating a vague positive feeling of trust in a particular insurance company, a flimsy trust from consumers who remain largely uninformed. Improving consumer insurance literacy is important for protecting the industry against an erosion of its original ideals, and against contagious dysfunctional mistrust. Key information about insurance, presented clearly, could also safeguard against the problem of too much trust in some situations by consumers, which allows exploitation by the unscrupulous in the insurance world. Better consumer knowledge would also help avoid unrealistic consumer expectations and disappointment. Negative public attitudes towards insurers might be curtailed if consumers had a more realistic understanding of what they were purchasing. For example, many consumers do not understand how deductibles work or that certain types of risks may be excluded from their policies. Often consumers may not know that there may be particular limits on certain types of property loss, such as stolen jewelry, or they may not understand how liability coverage works. They may have little comprehension of the investment component of life insurance policies. Consumers may purchase far more insurance than they need in some circumstances, and leave terrible and disastrous gaps in their insurance coverage in others.
A lack of understanding of their policies makes it difficult to impossible for consumers to shop comparatively. An economist would argue that the current knowledge imbalance between seller and buyer leads to a lack of effective competition among companies and poor functioning of insurance markets. While advertising alone certainly cannot solve these problems, such advertising could be part of a larger public education campaign. Thus the current state of advertising represents something of a missed opportunity.
We want to suggest here that ethical advertising, if part of a campaign to better educate insurance consumers, could help deliver on insurers’ promises of corporate social responsibility. Such consumer education could help reconnect to the idealistic roots of insurance. Informed consumers could better understand insurance as a mutual pact between themselves and others in the community, as well as with the insurance company. Consumers could see insurance is a pact that involves both risks and responsibilities for everyone involved[3]. Seeing it thus, they also may be more inclined to behave ethically when making claims and less inclined to commit insurance fraud.
It is important to note at this point that the functioning of insurance and the culture of insurance varies from country to country, in relation to factors such as the nature of social insurance systems, size and cultural homogeneity, and how individualistic or solidaristic their cultures are. It would be very surprising if unilateral or mutual mistrust and dishonesty in such insurance relationships did not vary by country and culture, and this is an important topic for future research. Yet some common problems can be identified across many Western nations and one key factor in these problems is a lack of consumer education and knowledge. Insurance’s original formulation as an ingenious and wonderful mechanism for mutual protection among equals is undermined in the contemporary situation, in part by the large knowledge imbalance or “information asymmetry” between consumers and insurers. Such a public education campaign as we suggest would ideally help create and reinforce a virtuous circle of well-earned and contagious trust between insurance company and consumer, drawing on the underexploited idealistic roots of insurance. This would provide an alternative to the current situation, which easily deteriorates into a vicious circle of contagious cynicism, in which insurance companies and a significant portion of the public engage in mutual blaming and shaming, especially in relation to insurance fraud. In other words, we suggest that the industry unearth the core of its product: mutual help and support when you need it the most.
One very large study of insurance in Canada reaffirmed what many people working in the industry already know: that consumers generally do not want to know much about insurance until they have a claim. The authors of that Canadian study (including one of the co-authors of this article) wrote: “In spite of its significance for people’s lives, insurance is a product that most buy with little appreciation. They spend large sums of money to purchase something they have little knowledge about and therefore cannot adequately assess with respect to price and features. The only material thing they obtain at the outset is a piece of paper: a legal contract that they rarely read and even more rarely understand. They do understand that embedded in the contract is a promise to pay if something goes wrong. However, the details are typically obscure … …”[4].
Marketing of any service is harder than marketing a tangible product, but there are some unique challenges in marketing insurance. Insurance is highly complex, which makes it especially difficult to explain, to understand, and to compare when it comes to benefits and prices. The target markets are somewhat heterogeneous but there are often low levels of consumer knowledge, interest and attention. Thus there is limited ability by consumers to judge both the content of messages and the properties of the insurance product. How should one market something to consumers who know little about it, who do not want to know about it, and who mostly hope they never have to use it?
Insurance is intangible and lacks the immediate glamour and sensual appeal of a shiny new object like a Lexus car or a plasma television. Because insurance is seen as “unsexy” and as dealing with remote, unpleasant and frightening possibilities that consumers prefer not to think about, the traditional industry answer is that it should be “pushed” to buyers, rather than being “pulled” by them. (This pushing is perhaps most notable with life insurance). Thus sales channels and techniques tend to be seen as more important and are better developed in insurance than elsewhere. Our review of several dozen selected insurance ads indicates the underlying assumption often seems to be that memorable images, such as those conveying danger, and especially recently humour, are necessary for attracting attention. There seems to be more importance given to image than to consumer knowledge. The general situation in the industry is that, despite the fact insurance is “pushed” to buyers, specific information about the insurance products in question typically needs to be “pulled” by insurance customers rather than being “pushed” to them. Customers typically get this information mostly during the selling transaction, but the quality and amount of advice may vary. Important information is concealed from ordinary people in the legal language of the insurance documents. In the absence of much substantial information about the product, branding, trust and reputation become relatively more important. While there is a tendency to complain about poor “financial literacy” about insurance on the part of consumers, thinking about the problem as one of public “illiteracy” and ignorance may put too much blame on the consumer and give too little responsibility to the companies.
One approach that has sometimes been used in insurance advertising, and has a long history in insurance sales, is to try to scare consumers into buying insurance. The following is a recent dramatic example from the US: http://www.youtube.com/watch?v=c9Rd-xQgU-g
The effectiveness and the ethics of what are known by social scientists as “fear appeals”, or attempts to persuade by scaring, in other kinds of advertising have received a lot of attention from researchers. Most studies on communication to audiences about health and safety issues have found that, while strong fear appeals are in general more effective than weak fear appeals, using fear to communicate has many risks and pitfalls. Some studies have found that too much fear is also ineffective, and that it is better to find a moderate level[5]. While the effectiveness of fear advertising in particular cases has been questioned, other researchers have also raised significant ethical concerns with fear appeals[6]. Fear appeals may lead to unwilling exposure by audiences to frightening material such as graphically upsetting images, and thus cause damage especially when campaigns reach unintended audiences. Scary ads may lead to increased and dysfunctional anxiety among high-risk recipients.
Some thinkers have even argued that the problem is a broader tendency in advertising itself to focus on the negative. It is sometimes argued that “modern advertising seeks to promote not so much self indulgence as self doubt. It seeks to create needs, not to fulfill them: to generate new anxieties instead of allaying old ones…It addresses itself to the spiritual desolation of modern life and proposes consumption as the cure”[7]. In this view, advertisers need to be painfully aware of the potentially negative side-effects of their intended messages. As mentioned earlier, according to the Insurance Marketing and Communications Association, there is a trend internationally in insurance advertising towards more positive ads which “empower” the consumer through a focus on the benefits of insurance, and especially a trend towards humour over fear. Fitting with the latter trend, many recent insurance ads we have observed rely on humour. The following are some examples from Norway http://w2.if.se/privat/risklab/index.html?language=NO and from Canada: http://www.youtube.com/watch?v=wSOPIYdWitQ
Some humorous representations involve playing around with ironic portrayals of insurance stereotypes. Several ads were rooted in common critiques of insurance, which were used in constructing an image of the respective companies as aware and responsive to the critique. For example, in their ads, the Canadian Direct Insurance company plays ironically on common negative impressions about the insurance industry, such as secrecy and non-transparency (http://www.youtube.com/watch?v=UYrcM5fPVSE) or slow claim handling (http://www.youtube.com/watch?v=mHZp_TJmYIA).
Research suggests advertising based on humor may be somewhat limited in what it can communicate. Humour attempts to persuade the consumer at a primitive level which psychologists call “peripheral processing” which requires little mental effort on the part of the consumer. It simply draws attention and creates a pleasant feeling that is linked to the advertiser and the advertised object[8]. This possibly may increase the consumer’s willingness actually to think about the information in the ad. One problem is that this presumes that there is actually significant information contained in the ad for the consumer to absorb, whereas many humorous ads feature little or no substantial information. Humour-focused appeals represent a low-risk way of triggering consumer attention and interest. However, there is a risk that jokes are enjoyed as an end in themselves, that they represent noise and may do little to increase consumer knowledge.
A third kind of insurance advertising focuses on trust. Trust-focused appeals communicate that there is no need to worry, because one’s company is very long-established, strong, competent, and caring, and that one is not alone when one is in trouble and needs help and assistance. This epitomized by the slogan of a massive American general insurer: “Like a good neighbour, State Farm is there.” Or this example from Farmer’s: http://www.youtube.com/watch?v=3O8eQoKU8Gk In a similar fashion, the Austrian insurance company Grazer Wechselseitige portrays various family security situations with the slogan “Graz Mutual (insurance) on your side” (see http://www.grawe.at/de/service/download_center_werbespots.htm ). Of course peace of mind can potentially help make the consumer lazy and vulnerable, too, feeling that one does not need to check on and control someone one can trust. We suggest that a different kind of trust is trust among informed parties, based on understanding rather than faith.
An alternative approach to insurance advertising could be to make it part of a broader campaign to address insurance customer competence, continuing in an earlier tradition of consumer education by insurance industry associations[9] and consumer protection agencies. (Norway had an industry funded insurance information office from 1945 to 1986). Given that the core of insurance products is risk and responsibility-sharing among individual consuners, customer pools and companies, increased insurance customer competence or literacy is in the best rational self-interest and common interest of both customers and companies.
We thus need to think more about who should take or share the responsibility for providing neutral, clear and comprehensible information to customers, especially consumers of below average competence. Who should educate the insurance consumer: public consumer protection agencies, the insurance industry and/or individual companies? How much does the single insurance company have a moral duty to educate its customers if there are no other educators available or accessible?
One could argue that it is impossible to provide sufficient information in ads and commercials, given limited and expensive space, and especially given the limited capacities of television[10], which is where insurance companies internationally spend the most advertising money. But insurance advertising could be part of a larger public education campaign and could persuade target groups to visit home pages of companies or other relevant sources of information, including real persons to talk with. The ethical duty of informing could then be fulfilled by such sources.
These appeals could also be linked to the idealistic roots of insurance. Even if insurance is primarily a business, this does not mean that insurance is only about business. There are clear moral and idealistic undertones to the insurance product, and in the historical beginnings of insurance[11]. When insurance companies nowadays claim to take corporate social responsibility, this can be reconnected to these roots. Insurance is a technology based on and fostering solidarity or mutual support among individuals as part of a community, sharing risks of accidental losses among pool members, working on a one-for-all, all-for-one principle. Many insurance companies began simply through groups of people co-operatively offering mutual fire insurance, where risks of losing one’s home and income were shared in a non-profit way. Few consumers any longer may think about insurance this way. Obviously there is sometimes a tension between this idealistic heritage and the reality of present day business life, of surviving or maximizing profit in markets. Yet the symbolism of this idealistic past is still kept in the names of many insurance companies, even if they are less mutual and more business focused today than they used to be.
We suggest such “informed trust” appeals might also be tied into the notion of corporate social responsibility for insurers. Consumers can trust a responsible company. Insurance companies make idealistic claims of corporate social responsibility or corporate citizenship on their websites.[12] Because the insurance industry has mutuality, solidarity, safety and security as historical values, we argue that such values should be exploited and focused on in how insurance companies present their corporate social responsibilities, instead of talking about more generic societal responsibilities that are common to any kind of business. Part of delivering on this responsibility is helping consumers understand how their insurance actually works, and understanding the solidaristic roots of insurance.
Responsibilities towards customers and pools as well as responsibility sharing with customers and pools should be emphasised clearly when insurance is marketed, but everyone can better enter into a relationship of responsibility when all parties are fully informed. Current ads focus on the benevolent company; the idea that company initially represented a community of other individuals that one was sharing mutual aid with is now most often lost.
What would an ideal informative insurance ad look like? It is easier to suggest simply that ads should be more usefully informative rather than how this could be done in copywriting and message design and by situating the ads in a larger public education campaign. Certainly such an education campaign faces many of the same challenges that insurance advertisers and marketers currently face, concerning the difficulty of interesting the public. A next step might be to invite insurance company experts, advertising and public relations professionals and target groups to separate or joint focus groups, or even to launch a competition for the best ideas.
More generally, we argue that insurance companies and their customers share a responsibility for creating an ethical climate in the insurance industry. More substantial insurance advertising and consumer education could be a great help.
[1] The small pilot project which is reported here has received small grants from Forsikringsakademifondet and from FH Joanneum University, Austria. Any responsibility for questions asked and for conclusions drawn rests with the authors, not with the funding sources. Besides the above mentioned authors, Kerstin Berberich, FH Joanneum University of Applied Sciences, Graz, Austria, also contributed to the survey and to some parts of the article. In her opinion, advertising of private insurance companies is aimed at something else than at consumer education. In other words, she has a different view from the one expressed by the authors here.
[2] http://www.imcanet.com/index.php?q=node/122
[3] Johannes Brinkmann (2007) “Responsibility Sharing (Elements of a Framework for Understanding Insurance Business Ethics)” Research in Ethical Issues in Organizations, vol 7, Elsevier, Amsterdam 2007, 85-113.
[4] Richard V. Ericson, Aaron Doyle and Dean Barry (2003) Insurance as Governance. Toronto: University of Toronto Press, p. 4-5.
[5] Valerie Quinn, Tony Meenagham and Teresa Brannick (1992) “Fear Appeals: Segmentation is the Way to Go.” International Journal of Advertising 11(4): 355-366.
[6] See for example, Gerard Hastings, Martine Stead, and J. Webb, J. (2004) “Fear Appeals in Social Marketing: Strategic and Ethical Reasons for Concern”. Psychology and Marketing 21 (11): 961-986.
[7] Christopher Lasch (1978) The Culture of Narcissism. W.W. Norton and Co, p. 72
[8] Charles S. Gulas and Marc Weinberger (2006) Humor in Advertising: A Comprehensive Analysis. M.E. Sharp Inc.
[9] A volume celebrating the 100th anniversary of the insurance association of Norway (Forsikringsforbundet) contains an article which describes a historical shift "from educating the public to industry lobbying" (see Døving, I. (2001) Fra folkeopplysning til næringspolitikk, in: Tannæs, E., ed., Forsikring en bærebjelke. En bok ved den norske forsikringsforenings 100 års jubileum, Den norske forsikringsforening, Oslo, pp. 79-84). The following quotation from that article describes the mission of an industry-sponsored information office for insurance (opplysningskontoret for forsikring) which was in operation from 1945 to 1986: [The information office had as its purpose to] "...spread information about all insurance types in order to create a motivation for being insured and for increasing the understanding of the importance of insurance for the individual and for society as well as countering criticism and increasing knowledge about the insurance business and how it is organized..."(p. 80).
[10] See for example, Neil Postman (1985) Amusing Ourselves to Death: Public Discourse in the Age of Show Business. Penguin.
[11] Deborah Stone, ‘Beyond Moral Hazard: Insurance as Moral Opportunity,’ in Tom Baker and Jonathan Simon, ed., Embracing Risk: The Changing Culture of Insurance and Responsibility (Chicago: University of Chicago Press, 2002), p. 52.
[12] See, for example, http://www.gjensidige.com/web/Front+Page/Corporate+Social+Responsibility or http://www.storebrand.no/site/stb.nsf/Enter/forsideenglish.html or http://www.wienerstaedtische.com/en/group/sponsoring-csr/ or http://holding.generali.at/__C1256A6F0044EA06.nsf/0/5E48D5529773C44DC12570F8003444EF.