Insurance: Is There Any Value?

The Wall Street Journal ran a fantastic analysis of private passenger auto (PPA) liability claims in August 2026. They identified that approximately 50% of all PPA liability claims were closed no pay (CNP) in 2025. No one needs liability insurance if coverage is a 50/50 proposition.

On August 17, 2026, a new research paper from HUB, one of the largest brokers in North America, identified that approximately 33% of personal lines customers with a claim were not fully indemnified. Another study from the American Property Casualty Insurance Association identified that approximately 67% of all homes are materially underinsured.

I received a call from a commercial insured, a non-profit, about an article I wrote on deductible expansion. He thanked me for the explanation because neither his agent nor carrier had explained the importance of going from a flat deductible to a percentage wind/hail deductible. Sure enough, they had a claim resulting in a $325,000 deductible. He did not have the working capital available for that deductible.

A question arises: Why is coverage so insufficient on such a large scale? Many argue that customers lack coverage because they do not read their policies and do not understand the coverage limitations. Without question, this is a huge factor, but it misses the point. One claim cited in the WSJ article involved a dad who ran into another car. His claim was CNP because he hadn’t listed a 14-year-old son. The son did not have a license and was not driving. In other words, the son was not a risk factor, but the policy required listing everyone in the household older than X. The insured did not comply.

It goes against common sense for someone too young to legally drive to be listed on an auto insurance policy. However, most states’ standards of care require the insured to read and understand their policy. In these examples, the requirements exceed the reasonable person rule because the latter defies common sense, and the former defies it based on a common person’s inability to calculate the value of their building specific to the replacement cost estimators that insurance carriers use. And the insureds don’t get the policy until they buy it. It’s an impossible standard.

Carriers have reduced coverage substantially, whether the issue is listing people who cannot legally drive or the fact that insurance carriers are experts on value and, in quite a few claims, have the option of choosing which replacement cost model to use (which is an ethical and maybe legal issue in and of itself) so the claim can be adjusted in a more favorable manner relative to deductibles and coverage. This really makes me question whether anyone should buy insurance other than when the law and mortgage companies require it. When I buy insurance, I don’t want a 50/50 chance of a closed no pay claim, especially given how high premiums are today and, moreover, how incredibly profitable insurance companies have become ($410 billion in the last three years).

What Is the Value?

What is the value in telling clients, “You only have coverage if you read the policy completely and understand all the language completely, and if you are not happy with it, it is your duty to advise the broker or carrier of the requested improvements”? What if the insured does not understand their own exposures or the policy language?

I teach insurance classes, and people with insurance licenses struggle to understand the definition of household members, much less how that definition varies from one policy to another. The replacement cost estimators used do not differentiate between true replacement cost versus replacement cost including ordinance and law coverage. Almost no one in the industry can point out how much ordinance coverage is required versus just replacement cost. How and why is it OK then to put this burden on insureds?

Some insurance companies and agents like putting the burden on the insureds because it reduces their liability–i.e., it reduces accountability to provide a product that provides coverage more than 50% of the time. Imagine that! In some cases, agents’ E&O carriers tell them not to provide professional advice due to the added exposure. This is awesome advice for peddlers but not for professionals. Peddlers are unnecessary going forward with AI, or at least their commission rate only needs to be about 8%. A person can charge more when they accept accountability.

The solution is simple but difficult to execute. First, create an insurance company that actually provides the expected coverage. This has already happened at higher levels of commercial insurance. The results are fantastic.

Accountability

Walking away from accountability makes a business irrelevant. Without laws and mortgage companies, most insurance companies and agents would already be irrelevant. Laws and mortgage companies subsidize their sales, even if they don’t recognize this reality. Historically, no one could walk away, but now they can have their own insurance companies, and the options are moving lower and lower in the food chain. I believe many insurance companies think they’re like the post office and can’t be replaced. Maybe they cannot be entirely replaced, but they can definitely be made less important and less valuable. Carriers would be wise to accept responsibility if they want to remain viable.

The second part is brokers stepping up. I am seeing new brokerages and other advisory businesses being created simply to advise insureds on their exposures and the coverages they need. These are experts who can read policies and understand exposures.

For agents, I have one other suggestion: track claims by carrier. An attorney might say the following differently, but due to disparagement laws designed to protect innocent agents and companies (but, in reality, protect questionable agents and companies), you cannot tell people bad things about insurance companies unless you have documentation. That is why I recommend tracking claims by carrier and then showing a consumer the results. When Company A’s rate is 20% lower, and you provide them with your data showing that it might be a lower rate because they only pay 50% of their claims, the consumer might think twice about accepting that lower rate.

A product that doesn’t work 50% of the time provides no value. Consumers have unknowingly become their own insurance companies given the exclusions and high deductibles. This fact alone means they need professional risk management advice. The value and opportunity are in helping insureds identify their exposures, providing risk mitigating solutions, and identifying carriers upfront that cover only 50% of their claims.