I attended a most interesting session today at the Insurors of TN convention. The speaker talked about what an agent must do to avoid getting trapped into selling on price. I would assume that most of us know why selling primarily on price is not good for our industry, carriers’ longevity, and in the long run the consumers, so I won’t detail those issues. Let’s just agree for the purposes of this post that selling primarily on price (or wholly on price) is not good.
Jeff, the speaker, talked about there being four components to an insured making a decision to do business with a particular agent: Price, Coverage, Relationship, Service. If we take Price off the table, we must sway the insured with the other three. However, the prospect cannot experience our service until we are actually doing business, and there is only an incipient relationship, if any, and it certainly cannot compare to the relationship the insured has with the incumbent.
That brings us to coverage as being the preferred (and sometimes the only) way to persuade an insured to bind coverage with us, versus the incumbent, or other competitors. Of course, if the insured has the primo policy of the world, written absolutely correctly, there’s not much we can do about that. Jeff recommends then, that we walk away from the quoting process, and stay in touch with the insured for a future try. Until the coverage situation changes and we can do something to improve their placement, we would not waste our time or our staff’s and carriers’ time, quoting something that we have no reason to believe will bind.
He does recommend that we acknowledge price as an issue and frame pricing as a component of value and commit to deliver value, versus cheap price.
Very interesting approach. He cautions that our most important diminishing asset is our Time, and this approach will keep us from wasting it, allowing us to devote it to more productive opportunities. Yes, every now and again we might bind a risk in this situation, but how often do we waste our time quoting risks have a very small chance of bringing us any revenue.
Imagine the level of professionalism and ever-better coverages insureds would enjoy if we all did business this way? Wow.
I have paraphrased his content significantly, and unfortunately could not get ahold of a handout for the session. So I offer this just as food for thought about how we frame our relationships with our clients.
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Interesting approach. However, any sales person will tell you, relationship is what matters. With little or no relationship, what’s the best coverage going to do? The other agent with a relationship will likely be able to provide that with a last look. But as an underwiter, glad to hear coverage matters too!
Thanks Chris, it is so obvious, isn’t it, that we brokers need to stop this insanity, but it is hard to do sometimes. I appreciate the support to do so.
My congrats on your blog; I have been checking the many insurance sites, looking for good ones that cover miscellaneous liability, and yours is one of the best.
Although i am not an agent or broker, I can see how your writing is useful to others (I publish The Betterley Report, blog at betterley.com/blog, and write about Cyber Risk, EPLI, Private Company Management Liability, and Side A D&O, and Intellectual Property insurance).
Hi, Rick. Thanks for the feedback. I recall seeing your Report somewhere in my past. I apologize for the lengthy delay in my reply. Sometimes I fall off the face of the blog earth and forget to check my comments!
Hi, Justin. Although I would *like* to think that relationship is what matters, I have found that in my little slice of the world, it is not important to everyone. Just as in personal relationships there are players and there are partners, not every agent is interested in a partnership. I terminate them or don’t engage with them to start with, if I can ID them early enough.
I think agents have the same issue with insureds. However, it is their prerogative to not engage with insureds that are players, right? We can pick our market positioning and proceed from there. I think many agents are afraid to say “no” to potential business, even if it means quoting for free and having a bad bind ratio. They feel that if they turn this prospect away, there won’t be another one right behind him, and they’ll regret having passed up the opportunity. But I think if they looked at their hit ratios and retentions with the partners versus the players, they would find that the players don’t bring in significant sustainable income. Theoretically, of course, as I’m not a retailer. I have found that to be the case in my own situation as a wholesaler.
I didn’t come to these conclusions wholly on my own. I was lucky enough to interview a few years ago with a woman who asked me how I would define my ideal client (which made me think about it), and she also posited the theory that we, as wholesalers, cannot control what the markets will do, and cannot control what the insureds will do, but we sure can control who we pick to be our clients. She felt that the key to success was partnering with the correct agents. And she didn’t pre-define them as being specialists, or national houses or anything like that. Just promoted the idea that a given wholesaler should define their ideal client, and then go after that type of agent. I’ve been doing that ever since, and I have to say it has made a world of difference.