The more bells and whistles your product has, the better, right? Not necessarily. A Berkshire Hathaway-owned company recently faced the consequences of an overly complicated product, in what turned out to be a worst-case scenario: legal action.
Applied Underwriters, a workers compensation insurance carrier and payroll company, had crafted a complex form of workers comp coverage it called a “profit-sharing” element.
Essentially, if a client company experienced few or no losses, it would reap savings. Conversely, if that same company saw heavy losses, its costs would soar, to a price ceiling.
The trouble was, all the ins and outs in the company’s policy were buried under dense legal jargon: Terms like “cession point,” “loss development” and “run-off term” befuddled clients, confusing them as to what they were getting into. The eventual result: multiple lawsuits against the company.
The lesson here is that…