Why do we need insurance?

Collective curiosities are conversations among members of the Kaiser X Labs team to explore ideas that fascinate us. To introduce the series, we decided to explore how people think about the need for insurance.

In the insurance industry we assume (and rightly so) that nearly everyone, everywhere needs insurance of some kind. But how that need is perceived and what the right level of insurance coverage might be varies widely among people and cultures.

Of course, we have data that helps us understand certain facts about coverage: the average number of policies in a given country; how insurance coverage is affected by age, gender, or marital status. But that doesn’t get to the human side of insurance. And it doesn’t answer what we see as some of the more interesting questions. For example, why do people get insurance in the first place? How much insurance do people feel they need? How do you know if you’re adequately (or inadequately) protected?

As a team, we decided to explore and discuss insurance from this very personal point of view. To do so, we engaged in an on-going Slack conversation in which we shared personal and professional experiences that have emerged from years of living and working in many
countries: Germany, the United Kingdom, India, the United States, and many more. Through this conversation, we challenged ourselves to shift perspectives and think about insurance and the services we provide from others’ points of view. Examining familiar concepts from multiple perspectives and challenging assumptions are key to the innovation work we do.

The initial prompt for this discussion was a simple question that came up within the team: Are Germans over-insured? For team-members born and raised in Germany, where the values of “planning, preparation, and process” are ingrained in the culture, over-insurance was not quite the right frame for the question. As we discussed motivators for insurance, the question became framed somewhat more broadly: What are cultural norms for insurance
and why are they important?

Germany as our starting place.

Our shared connection to Germany provided a good starting place for exploring how culture drives thinking about insurance. One team-member heard during consumer research “It’s not necessary to be over-insured, but it’s good.” “It’s a jungle out there” goes one saying, with the follow-up advice that you’d better be well insured before you start swinging on the high branches. Another cautionary tale shared by parents is what’s come to be known as the “Porsche Scenario.” This asks you to imagine biking down the street and running into a Porsche and then ask yourself whether or not you’re properly insured. Clearly, it’s possible to run wild with the idea of being prepared for every circumstance. But a less extreme indicator of the value of maintaining proper insurance coverage is the common German practice of having a personal insurance advisor to help manage insurance. Relationships with insurance advisors are important. As one team member said,

“My girlfriend communicates with her insurance advisor more often than I do with my mother.”

We wanted to explore why it is that some cultures, like Germany, readily embrace the concept of insurance while others may need more convincing. Our dialog suggests a number of possibilities.

In the rebuilding period following World War I & II, Germany became decentralized. There was movement away from nationalism, and personal responsibility became increasingly important. For example, unlike other European countries, Germany’s mandatory national healthcare is not provided by the central government, but is purchased by a multitude of

In the German model, each citizen is responsible for handling his or her own individual health insurance.

One member of the team suggested that the German approach to responsibility begins with the individual, works its way out to the people closest to them, and ultimately reflects responsibilities as citizens to the society at large. In this context, the drive to buy insurance — and plenty of it — can be seen as a concern for being responsible for one’s actions,
behaviors, and consequences.

We wondered then, what are other models for how people view their need for insurance?
We will continue exploring those in models in our next posts.