As many of you know, I have written and spoken extensively about why insurance is not a commodity. I have also expressed great displeasure in how this myth is perpetually perpetrated by insurers whose advertising focuses almost exclusively on price. For examples of such articles, simply search my web site for “commodity.” A recent claim under a non-ISO personal auto policy triggered this article.

I personally believe it is unethical and possibly a violation of unfair trade practices laws to imply that you get essentially the same coverage from one auto policy to another. For example, one auto insurer’s past advertising slogans have included assertions such as “SAME COVERAGE, Better Value” and “You get the SAME COVERAGE, often for less.” It’s not the “same coverage” and the following illustrates that under that carrier’s policy.

An insured owns and insures three autos on this insurer’s proprietary personal auto policy (PAP). Coverage on two of the autos includes liability, medical payments, uninsured motorists, and collision and comprehensive, but the remaining auto is only insured for liability and comprehensive coverage, not collision. I suspect you know what’s coming….

At 4:30 p.m. on a Friday, this third vehicle is traded in on a replacement vehicle. At 6:30 p.m., the insured is involved in an at-fault accident in the new vehicle. The insurer has denied the collision claim based on this policy provision:

“A ‘replacement auto’ will have the same coverage is the auto it replaces….”

Since the vehicle that was replaced did not have collision coverage, neither does the replacement vehicle. The ISO PAP said the same thing…in 1994. In 1998, almost 23 years ago, ISO revised their PAP so that the BROADEST coverage available on any other declared auto extends to any acquired auto.

The agency’s other major auto insurers all follow the ISO language. The agent advised that, “I was schooled that if a policy has a car with ‘full coverage,’ that the broadest coverage applies when you purchase a new car.” RTFP! Know the differences between the products you sell.

Insurance policies are NOT the same. Insurance is not a commodity differentiated only on price. And it’s about time that insurers stop misleading the public. Should insurance regulators, as is the case in the pharmaceutical industry, require insurers to include coverage caveats in their marketing and advertising? If you have an opinion, feel free to comment below.

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Bill Wilson

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One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information