This is a guest blog from Tim Wahl, CIC, commercial marketing manager of the Gallaher Insurance Group in Clayton, Missouri. It is based on his Coverage Advisory Committee article “When It Comes to Serving Clients…Do You Lead or Follow?” published by the Missouri Association of Insurance Agents in their Missouri Agent magazine, September/October 2014.
I’ve heard it from agents for years…Consumers (and businesses) only care about price, not coverage. Tim is living proof that this is not true IF you know your products, can identify the gaps in prospects’ current insurance programs, and know how to sell on the basis of coverage instead of price. Tim has shared with me many times examples of commercial insureds who come to him wanting to save money and leave paying more than they’re currently paying BUT with MUCH better coverage. Tim proves time and time again that coverage CAN be sold. It’s a win-win for all concerned. So, on with Tim’s story…
When it comes to policy limits, forms and coverage, being a leader pays off for you and the client! Are you leading your clients so they understand that not all insurance is equal?
Home and auto insurance commercials or ads touting how people can save 15% in 15 minutes (or less) drive me crazy. I’m an independent insurance agent who cares about clients and I want to help them protect themselves through insurance coverage. I’m not sure about you, but it takes me longer than 15 minutes to learn enough about a customer to even begin to talk about their insurance. There is too much to ask! I don’t sell a commodity. My job is to help lead clients through the process of purchasing insurance to properly protect their financial well-being.
First, let’s get one thing straight: a commodity is something which is the same or very similar no matter the source. Gas, oil, drinking water, and electricity are examples. Insurance is not a commodity because not all carriers use the same forms and language! One carrier’s policy form may be 13 pages long, while another carrier’s policy on the exact same risk is 70+ pages. Clearly these two policies are NOT the same. Which policy is the best? It all depends on what the policy coverage forms say! Sometimes forms add coverage and sometimes forms take coverage away. Insurance coverage is most certainly not a commodity because coverage and coverage limits vary by carrier.
A family buying a nice home and shopping for insurance was referred to me. The husband proudly told me he already had three other quotes and just wanted to know what my premium was. It would have been easy to say I couldn’t help him (because he was a shopper) or worse yet just give him a quote simply to give him a quote. Instead I asked questions and I counseled the prospect on how insurance coverage worked, why it was needed, why insurance was important, why one company’s policy might be better for them, and showed them how policies could be tailored to meet their needs.
The prospect’s household had what I considered high earnings ($80,000 per year) and assets, and were driving around with auto limits of $50,000/$100,000/$50,000. I sold the family insurance for their new home (with earthquake and jewelry covered), auto insurance (with $500,000 limits) and a $1,000,000 umbrella policy. How did it happen? Three other agents were selling premium thinking insurance was a commodity and I was selling coverage. I told the family they were one auto accident away from losing everything.
“What do you mean we are one accident away from losing everything?” asked the prospect. I explained that in our legal system if you cause damage you are liable and can be sued. They come after your assets and future earnings; part of every future paycheck goes to them. In fact, they simply have your employer send money directly to them saving you the trouble of writing a check. Wage garnishment will stop once the judgment is paid off. Insurance protects a customer’s cash and cash flow, assets, future earnings, family, and lifestyle.
What I find so rewarding is that once people understand how they can be sued and how their future wages can be garnished, they are usually very open and willing to purchase insurance limits at a level that will better protect their assets and lifestyle they have worked so hard to obtain by purchasing an umbrella policy or better primary coverages.
Instead of pretending insurance is a commodity, and following along with how it’s treated in the media, become an insurance coverage leader! Since personal lines is most often (and erroneously) considered a commodity, below are some examples of exposures and questions to address with personal lines prospects.
Home insurance leaders
- Make sure owners of a home are named insureds! Offer guaranteed or extended replacement cost (if possible). Special form contents coverage is better than broad form coverage.
- Do they have enough ordinance and law coverage?
- Earthquake: if you can get it, buy it! Why? It not only protects the structures but also triggers coverage for loss of use should an earthquake occur! Insureds ask me what I think about earthquake coverage and I tell them I buy it because it would be really bad to have a home loan, not be able to live in my house, not have insurance to fix my house, and not have insurance to pay for living somewhere else.
- Every home policy needs personal injury coverage.
- Is their water backup coverage limit high enough?
- If they have a cosmetic damage exclusion on their current policy, ask the customer how they would like having two different colors of siding? New siding mixed in with old siding? Ask if they would be okay with their metal roof covered in dents, and having no coverage for repairs. Many times they can’t sell the home without cosmetic damage being repaired, so it becomes a self-insured loss.
- Dog bite exclusion: First see if they still have the dog that triggered the exclusion. Sometimes you’ll find the dog died and they now have a poodle, yorkie, or some type of dog the carrier would be okay with removing the exclusion on. Some exclude all dog bites and some exclude only a specific breed/type of dog. A total exclusion should be avoided so the insured doesn’t lose coverage for bites from all types of dogs. Many pet owners have more than one dog.
- Some carriers still have one all-peril deductible: a $1,000 or $2,000 flat deductible is better than a higher percentage deductible.
- Ask each prospect/insured if they own anything old, unusual, rare, exotic or valuable. The answers I’ve gotten over the last 24 years have been amazing! I’ve insured the largest shotgun shell collection in the world (35,000 shells), one of the largest Barbie collections, dinosaur bones, lots of artwork, and huge toy truck collections. The list goes on and on. People don’t mind buying coverage to protect their valuable things. In fact, they will buy the best coverage because these items are important to them!
Personal auto leaders
- Ask who owns the autos and makes sure all listed owners are adequately protected. I find many errors here. When quoting and making policy changes (once you write the account) ask whose names are on the title; you will be shocked with the answers you receive. Each person or entity on the title is legally responsible for the auto and can be sued.
- Ask if they own any other autos besides the ones on their current Dec. page! You will again be shocked at the answers you receive. Let the other agents only work on autos listed on their current policy while you point out to the insured the additional risk from children’s vehicles of which they are co-owners, which are oftentimes insured at very low limits by the child, many times without the co-owner even listed as an insured on the policy.
- Do they have high enough limits? If their auto limits are low, tell the prospect/insured that they are one auto accident away from losing everything! It’s that simple!
- Do their under and uninsured motorist limits match their main auto liability limits? If you haven’t yet lived through a really bad UM/UIM claim your time will come.
- Check to see if they own any trailers, recreational vehicles, boats or jet skis. Explain to the prospect/insured how they are liable for these items.
You know the saying, “We have met the enemy and he is us?” Insurance carriers communicate with the public via ads marketing low prices leading the public to think insurance is a commodity. Let’s be leaders and show our customers and prospects that insurance is not a commodity!
Copyright 2014 by Tim Wahl. All rights reserved.
For reprint permission, email tim@gallaherinsurance.com.
Bill Wilson
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State Farm does not even know what personal injury is and you have to ask for and explain it to them the underwriter readily agrees when this is done. Divorce is so common and addressing that on the named insured is rarely done. My caveat is to see whose name is on the deed. that is for sure who needs to eb on the HO policy. Ordinance and law is never mentioned around new housing yet here in Atlanta building ordinance have changed greatly in fifteen years. for instance the type of glass permitted in bathrooms and the requirements of circuit boxes and hot water heater sizes. All may come as a shock when loss occurs. I use a 2% deductible and include earthquake. Only State Farm offers it in Atlanta at less than a 10% deductible and we are more likely to have earthquake than a windstorm loss according to actuaries. I would add this to the checklist. Flood also needs mentioning despite the crummy federal plan (it is to flood what the subsidized premium market is to health) and see what options are alternatively available. CPL limits also need examining and that should trigger the personal excess policy discussion.
For auto never buy or sell UM and UIM. If you are worried about the uninsured illegal alien driver or Jose that is carrying statutory minimum then protect yourself with health, disability and even life insurance. Same for UIM. Very bad buys for the consumer. Also delete towing., passenger accident and any other fringe endorsement similar to these. A complete waste of funds. Excess and high limits make a target of the inured. they need to understand this. I recommend asset protection and veiling as part of the risk management process instead of just higher limits. This can lead to some incredible sales opportunities in other lines of business.
Insurance is a commodity but it is also a huge market place of vegetables and fruits. It is the role of the agent to direct the client to correct fruits and vegetables . they may be commodities but selecting the commodities requires instruction and direction.
I know someone who consulted pro bono with homeowners following the Colorado Waldo Canyon fires. According to his estimate, two-thirds or more of the HO policies were placed with direct writers and captive agents. Out of hundreds of policies maybe only a couple or a few dozen had any kind of optional broadening endorsements and when they did, there were usually for scheduling jewelry. ISO alone has dozens of ways to broaden coverage to meet individual needs but either these options were not offered or not bought.
The importance of customizing policy protection/coverage is especially important in a post-disaster setting. In 2012 and 2013, I was a volunteer insurance consultant who helped 250-300 homeowners who lost their homes in the Waldo and Black Forest wildfires with their claims. Wow, after 44 years in the insurance business in many different roles, I was very surprised at what I learned and through which I needed to navigate. In fact, I tell my insurance colleagues that I probably learned more about the insurance mechanism and its homeowners coverages than I had in the preceding years. As an independent agent, it was interesting to compare all the direct writer (which represented 80%+ of the homeowners with whom I consulted) and independent company policies Here are a handful of my takeaways:
1. There is wide variation in the way each company’s policy provides protection. It is important for consumers and agents alike to properly read and understand these policies before the disaster to make sure they really know what they are getting.
2. Most consumers do buy based on cost and are very surprised when a total loss happens that perhaps they did not purchase the full coverage they expected. In these times of increasing extreme weather and natural disasters, I really do advocate that agents make sure they are advocating for protection/coverage and making sure they document their insured’s election for low cost.
3. Most consumers and agents sell on the basis that the purchase of their basic policy is all that is necessary without any customization of their protection I was really surprised to see very little customization of the policies. I estimate that I saw about 20 policies with any customization of which 12-15 were to schedule jewelry; 2-3 increasing other structure coverage; and the remaining 2-3 scattered.
4. The importance of law and ordinance coverage and extended/guaranteed replacement cost protection is critical in a post disaster claim environment. Wide differentials between how companies approached both issues were noted and led the Colorado Legislature to adopt the Homeowners Insurance Reform Act of 2013 to close some of the gaps identified in the post-Waldo disaster.
5. Finally, recovery time periods do not always correspond to the generic policy time limits for getting a claim resolved.
Many more lessons learned, but just want to commend Tim for writing this guest blog and sharing his insights on this timely and critical issue and Bill’s sharing this insight on this blog. Going forward, the ability to sell protection rather than costs looks a critical skill for all agents selling insurance in these challenging times.
John, thanks for adding accuracy and insight to my comment about your experience. The $64,000 question is whether coverages are not being sold by agents or if no one is buying. If it’s the former, that doesn’t bode well for the value of agents in this part of the buying process. If it’s the latter, then Tim’s article is exactly on point.
Really hard to answer the $64000 question. When I teach the mandatory CO CE class which is now required after the wildfires, the agents of all stripes indicate they try to sell protection but the customers just buy price. Certainly, the popular culture buying on price is encouraged by the many ads shown on TV and other media. Frankly, I often wonder if the agents know how to sell coverage anymore. After the fires, the coverage consciousness of the folks was raised to a new level. Wonder if they still are as HO prices in CO are continually rising due to hail.
Personal lines is likely harder to sell on coverage compared to commercial lines. That’s why it’s so important to educate consumers that insurance (policies, carriers, claims practices, etc.) is not a commodity. As I wrote in another article, when my son was small, he would have happily lived on a diet that consisted exclusively of chicken nuggets and candy. He didn’t know any better. He was ignorant about nutrition. The same is true when it comes to consumers…they’re ignorant about the differences between policies and carriers and about how they can be financially ruined by choosing poorly.
There’s a scene in the movie The American President with this dialogue:
Lewis: People want leadership. And in the absence of genuine leadership, they will listen to anyone who steps up to the microphone. They want leadership, Mr. President. They’re so thirsty for it, they’ll crawl through the desert toward a mirage, and when they discover there’s no water, they’ll drink the sand.
President Sheperd: Lewis, we’ve had Presidents who were beloved, who couldn’t find a coherent sentence with two hands and a flashlight. People don’t drink the sand because they’re thirsty, Lewis. They drink it because they don’t know the difference.
The same is true of insurance consumers. They don’t know the difference. That’s the mission of every agency selling personal lines…educate them about the difference.