Transparency Tangle

No doubt it was only a matter of time that the nation would see the word “transparency” included in the title of a bill before Congress.

And there it is–the Wall Street Transparency and Accountability Act, which just passed the Senate Agriculture Committee in mid-April. It was sponsored by Sen. Blanche Lincoln, D-Ark, chair of the Agriculture Committee.

That should come as no surprise. The T-word has become so commonplace that not a day goes by that someone in Congress, state regulation, and/or business does not dangle it before the public eye.

It’s popping up in insurance products, too. The question here is, is the term widely understood in the insurance context and does it add value? Let’s unpack it.

The word is circulating in insurance in a number of ways.

Many new insurance products tout transparency as one of the policy’s redeeming features. Examples: “This policy is not only flexible; it’s transparent.” “You can see clear through.” “It’s so transparent that you can go to a password protected website to see all your policy values, 24/7.”

Transparency is a frequent focal point in many state insurance regulatory efforts, too. The regulators often call for transparency of data to support health care rate increase requests, for instance, or in sales literature that describes complex policy features and financial guarantees, even for fees in settlement transactions.

(As fate would have it, transparency inquiries sometimes go the other way and slam the regulators–as when the Center for Economic Justice, Austin, Texas, recently criticized the National Association of Insurance Commissioners for not using a more open process to develop revisions to its Suitability in Annuity Transactions Model Regulations.)

Many legal actions involving insurance sales now lean on transparency issues. For instance, attorneys commonly seek to ferret out what was “hidden” in the transaction–i.e., what was not transparent? What commissions were paid, to whom, when, and where? Were the policy fees fully disclosed to the buyer? Was the customer clearly informed that rates could go up in future years? And on and on.

Consumers’ eyes are trained on insurance transparency, too. For instance, 70% of over 3,500 consumers surveyed recently by Accenture say that “transparent pricing” is a key criterion for choosing an insurance provider.