You just can’t try insurance before you buy it—not really. You can read car insurance company reviews via some online digging, but a.) they’re subjective and qualitative and b.) they’re not particularly easy to find or all in one place. But car insurance is a product being sold to you, and that product is supposed to serve an incredibly important purpose: Perhaps above all else, we carry car insurance (and health, and life, and for the fancy among us,
boat yacht insurance) to protect us in the event that something catastrophic happens. Sure, friendly customer service is necessary, and small claims are important, too, but the whole point of insurance is that you pay a small amount over a long period of time, rather than a crippling amount at once. Except: What if that small amount didn’t come back around when you filed a big claim? What if you had a terrible accident—and the insurance company said it wouldn’t pay?
An Accident & Its Aftermath
This is exactly what happened to Dan Karr, a former Silicon Valley tech company’s VP of marketing and sales who used to ride his bike every day to work. Several years ago, Karr was struck by a car while on that bike. And that’s when everything changed for him. He suffered a collapsed lung, broken ribs, and a broken hip. He spent several months in recovery. Then, the floor dropped out. “Suddenly my health insurance provider decided they weren’t going to pay,” Karr says.
His health insurance company argued that Karr’s bills should be the responsibility of the driver’s car insurance. But the driver’s company also wouldn’t pay—and the driver was only carrying a $50,000 policy, while Karr’s unpaid medical bills totaled nearly $84,000. Karr was carrying underinsured motorist coverage, but his own auto insurance company also said no. He hired a lawyer to fight the case, and eventually settled out of court, but it was a painful and drawn out experience. “It doesn’t matter what insurance you buy,” Karr says. “My experience has been that you’re not really insured if you have a major claim.”
Karr’s Proposed Solution
Karr felt driven to do something. His background in tech, marketing, and numbers made him the right fit, he says, to build a tool to address the problem. He explains his plan in a Kickstarter video: “Insurance companies routinely delay and deny large claims, and I’ve experienced this problem personally. So I set out to develop a system that would eliminate this problem for all of us. I’ve developed a system that accurately measures, rates, and ranks insurance companies based how well they pay claims. With this system, you can get a custom report that will identify how well your insurance company pays claims, and make recommendations on which companies may be better.”
Just how does he propose to do this? By mining data that analyzes the financial reports of insurance companies, Karr says he will be able to “accurately provide a rating and precise ranking of their claims payment history for the company and for their product line.”
It’s a message that resonated with me—why shouldn’t you be able to find out the way former customers have been handled by a company? There are ratings systems in place, of course, including AM Best and J.D. Power rankings, but still, the idea of a ratings system based entirely on compensation amounts for claims is intruiging. Karr argues, too, that the J.D. Power and AM Best ratings fall short because they are customer survey- and credit-based, respectively.
Karr also explains in his video something I often find myself saying when talking about The Zebra: “You don’t want insurance based on their advertisements.” This might sound intuitive, but it’s important not to forget the power of advertising: This piece explains that 18 percent of Progressive’s customers made the decision to go with that company because of a TV ad.
Changing an Industry
Instead, he says in the video: “You want insurance based on what they will do for you when you’re in need. If your insurer isn’t the best, I want you to switch. And when millions of people begin switching insurance providers in favor of better insurance plans and payouts, the entire industry will have to improve to retain customers. This is the positive change that I’m ultimately trying to create.”
How can it be that an entire industry can operate this way? Is it really true that they all operate this way, adopting a policy of “delay, deny, defend”? The second question might be up for more debate, but Karr did offer an argument for the first: “The Bureau of Consumer Protection is part of the Federal Trade Commission,” Karr says. “Taking the first sentence of their website, it reads: “As the nation’s consumer protection agency, the FTC takes complaints about businesses that don’t make good on their promises or cheat people out of money.””
It’s Karr’s argument that insurance companies being exempt from federal regulation means consumers buying insurance “do not have the powerful protection the Bureau of Consumer Protection offers consumers buying products from other industries.”
He says the numbers are disheartening: “Every year, as a long-term trend insurance companies pay less and less and charge more and more.”
A Growing Voice?
Karr is creeping closer to his Kickstarter funding goal of $20,000, but he has invested his own money in this battle, too. “I just thought, I need to do something about this. This is not a good situation. It’s going to be a tough battle, and going to take a long time—these companies have built a lot of trust and loyalty over the years. But a lot of people have been through similar situations as me, and they can help communicate the message.”
Indeed, even a quick Google search for “car insurance company reviews” brings up articles like this one. The article itself is a relatively dry, straightforward comparison of companies based on customer service reviews and survey results. But the comments section is 1,000+ strong and bursting with passionate attacks of some big-name companies with stories that do sound an awful lot like Karr’s.
For example (following Karr’s lead in the book he wrote on the subject, I cut the particular company, though I will say it’s a household name):
“My son was rear-ended while stopped at a stoplight by a “distracted” driver who plowed into him at 40 mph, leaving no skid marks. His car was totaled. The other car’s driver was insured by XX. You would not believe the runaround he has been getting for the last 7 months from the XX adjuster, so much so that my son has had to hire a lawyer.”
I asked Karr if he felt a responsibility to embark on this project, and he told me responsibility isn’t quite the right word. “It’s not like somebody expects me to do this,” Karr says. “It’s more passion: I have a passion to make sure nobody goes through what I went through.”
His ambition is no smaller than this: By exposing which insurance companies are generous with claims payments and which are stingy, Karr hopes that consumers will switch to the generous companies. Eventually, unless the stingy ones want to go out of business, they’ll have to change practices in order to keep up with the competition. And voila: A whole industry, changed.
And it is the industry that Karr finds fault with, by the way, not necessarily the individual companies. That’s why he doesn’t even name the companies involved in his book. “I never name names,” Karr says. “Some people have tried to get me to name them, but it transforms the story. The story isn’t, “This company did something terrible to me,” the story is, it’s a dysfunctional industry. It’s not an industry that’s delivering what they promise; they’re promising protection to consumers and they’re not honoring that promise.”
Karr says consumers are afraid to speak up: “A lot of people are afraid to do anything; they’re afraid to even say the name of the company or what happened, worried about the repercussions from these incredibly powerful companies,” Karr says. “The companies are just running a business, and I don’t blame them for that, but what’s wrong is they’re not in a competitive market.”
“Consumers need an opportunity for something like this to get traction,” Karr adds. “I’m just 3 or 4 grand away from making the car insurance goal. Then we’re into health care.”
You read that right—Karr wants to tackle other insurance industries, too. After all, he explains, one of the initial companies involved in his car accident was his own health insurance company. “Health care is changing so fast, and our site would go live just in time for people making their decisions at the end of the year. With so many new plans, people have no idea how to make a decision, so it’s an important message.”