Cheap Insurance

The Pennsylvania insurance commissioner, Herbert S. Denenberg, is shaking up the insurance industry with his recently published Shopper’s Guides to Life Insurance and Auto Insurance. His objective is simple. He wants to give consumers more and more facts about individual insurance companies doing business in Pennsylvania so that they can choose bargains and save millions of dollars. Soon to come is a Shopper’s Guide to Health Insurance.
Naturally, taking the mumbo jumbo out of the insurance salesman’s pitch and comparing the cost of insurance on a company-by-company basis are particularly upsetting to the higher cost companies. Prudential, Metropolitan, Connecticut General and Travelers are some of the insurance giants far down on the list. They are 28th, 36th, 38th and 49th respectively. It’s a mistaken impression that the biggest companies are the best. Successful insurance selling has too often been a matter of getting the most salesmen, working on the highest commissions, to the most uninformed customers.
Denenberg, a former insurance professor and prolific author, admits that the Shopper’s Guides are just starters for what will become much more comprehensive manuals. The first edition of the life insurance guide, for example, only shows which of the largest 50 companies charge the most and which charge the least for straight life insurance policies at three different ages — for the =ale at ages 20, 35 and 50, and for the female at ages 23, 38 and 53. Yet for the same coverage, the true cost (taking into account dividends and cash values) varies between the lowest and highest cost policies by more than 170 percent!
In May, Denenberg issued a special supplement showing the ten highest cost and the ten lowest cost companies of the 166 largest life insurance companies doing business in Pennsylvania. Expecting companies to scramble to get off the ten highest cost list, he declares, “We will continue to publish the list of the highest cost companies in order to put pressure on all life insurers to lower their premiums.”
The commissioner urges critics of these Shopper’s Guides to publish better ones. Indeed, Denenberg hopes that his auto, life and health insurance guides will encourage companies to explain price differences more effectively. Some insurance companies and trade associations have countered by saying that cost is not the only factor to be considered in buying insurance and that there is such a thing as performance or service. Denenberg agrees. But he says that cost is still pretty important and that it is up to the companies to make these costs, as well as their service, open and clear to the consumer.
The Pennsylvania commissioner is trying to sharpen disclosure regulations so that the insurance companies take over the functions of informing the consumer and engaging in vigorous price competition. These guides will be refined and expanded. Already Denenberg has put out a preliminary guide comparing Philadelphia hospitals and another list of life insurance companies whose policies are so confusing that it is nearly impossible for buyers to know what they are getting and how much they are paying for it. All of these guides can be obtained free from his Harrisburg, Pennsylvania office.
There is no reason similar Shopper’s Guides cannot be produced by other insurance commissioners. I am sending letters to the commissioners in the other 49 states, the District of Columbia and Puerto Rico urging them to do that. Denenberg says that tens of thousands of citizens from all over the United States are writing to Harrisburg for these Guides. They should be available, in ever expanding form, from all the state insurance commissioners.