Sunday, September 25, 2016

When companies alarm customers needlessly

When A.S. received a letter from the insurance company that held the policy on her house, she was concerned. In the first paragraph of the letter, it indicated that the company wanted to clarify how it handled late payments.

Rarely had A.S. received anything in the mail from her insurance company other than an invoice for the cost of that year's insurance. But this letter raised her concern that perhaps she had missed making an insurance payment since there was nothing in the letter to indicate whether her account was paid in full. There was a note that customers could shift to an automatic payment system where funds could be withdrawn directly from their checking accounts.

A.S. had never had any interest in setting up an automatic payment plan. She liked writing a check after the invoice arrived in the mail. But she feared that perhaps a payment had not been received, or, even worse, that she had neglected to pay on time even when she thought she had.

After calling her insurance broker, A.S. was told that she indeed was not late with a payment and "never had been." The broker pointed out that in the letter it indicated that the lateness is not an issue for most customers. But because of the regulatory nature of the industry, it felt obligated to send out a letter to all customers.

"They've been my insurance broker for more than 20 years," writes A.S. "They have all of my records on file. They knew I wasn't late with my payment and that I'd never been late with a payment. Shouldn't they have included a notice along with the letter that indicated I had paid on time? Even if they feel obligated to send a letter like this, isn't that the ethical thing to do to avoid alarming customers who always have paid on time?"

While A.S. has every right to be annoyed with her insurance company for not anticipating that its letter about the change-in-late-payment policy might confuse or alarm some of its customers, the company didn't cross any ethical line.

By meeting its obligation to send the letter, the letter writers did what they felt was needed to keep customers abreast of a policy change. The insurance company did what it believes the regulatory agencies governing it required it to do.

But by not including a note with each letter to indicate which policy holders were late and which weren't, the insurance company lost an opportunity to engage in good customer service. If longtime clients such as A.S. had received a statement of their accounts along with the policy change letter, any unnecessary concern could have been alleviated and the number of phone calls to the agency would have been cut down significantly.

Certainly, the right thing for any financial service company is to comply with the regulations that govern it. But there are times when companies, if they want to solidify their relationships with new or longtime customers, should take the extra step of doing what's in their customers' best interests. This should have been one of those times. 

Jeffrey L. Seglin, author of The Simple Art of Business Etiquette: How to Rise to the Top by Playing Nice, is a lecturer in public policy and director of the communications program at Harvard's Kennedy School. He is also the administrator of, a blog focused on ethical issues. 

Do you have ethical questions that you need answered? Send them to 

Follow him on Twitter: @jseglin 


1 comment:

Anonymous said...

The customer is always the person who must make every effort to make sure all insurance payments are sent and on time. Playing this game the way this customer did, they would deserve a late notice or lapse in policy. The customer should have immediately called the insurer personally to make sure if the policy was still in force.

Charlie Seng