I have only been in the insurance industry for 35 years and have not seen everything by any means. I have, however, observed a large majority of sales consultants, including almost every prominent one. Sales consultants are kind of like whack-a-moles, they come and go and some go and come back again and again with new schtick each time. I have found that not many of their strategies work in a sustainable manner.
Strike the tactics some might question as unethical such as cutting coverage but only showing the lower price, misrepresenting risks on applications, presenting one's self as a risk consultant when no risk consulting is involved (especially if the producers are not qualified to be risk consultants because they do not know the applicable coverages), and so on and so forth. Their failure is frustrating from many angles but it is especially frustrating to those of us who want to see insurance sold well and in a manner that truly protects clients. There is a running joke about one or two such consultants that they must have incriminating photos of their clients because no one can figure out why their clients keep paying for their services. The answer is simple, salespeople chase shiny silver lures with more passion than fish.
I am not being mean. I am simply stating the truth.
About twenty or so years ago I was asked to review a complex alternative risk plan. The difference in funding between the way the program was promoted and the actual math was 100% -- literally 100% (well, maybe 97%). The seller of this program represented that the cost would be half as cheap as it actually was going to be. Producers loved it and sold a bunch of these plans. I recently described the plan to someone, including the issue that the cost was double what was presented, and the producers still asked where they could sign up, was it still available? Is your job to make sales, even the wrong sales, even disingenuous or arguably unethical sales? Or is your job to take care of your clients and be accountable to them?
I am currently seeing agents continually buying new agency management systems that they think will fulfill their needs. The systems may or may not work on a daily, micro basis. However, most do not work well relative to the overall management of an agency on a macro basis. One reason the agency management systems fail at the macro level is that the systems are not designed for quality agency accounting. Some sellers suggest using QuickBooks, but QuickBooks cannot do independent insurance agency accounting correctly without significant additional effort that will most likely require new coding beyond the ability of 99% of agency owners.
All these entities, and I could go on regarding other substandard products and advisors, exist because their ethics permit it, but also because too many buyers see a big "Easy" button. They get excited and fail to do any due diligence. A good recent example was when a sales consultant decided to be a captive manager who was associated with another consultant who set up a network with specific agents. My imagination is not creative enough to make these things up. To the best of my knowledge, none of the agents, NONE, did any due diligence prior to signing the contracts.
Captives done well are math intensive. Sales consultants are rarely math majors, but they can count dollars fairly well. Trusting a sales consultant who is selling captives is such an obvious mistake. Just retire your brain and turn in your license -- which is easy to say if you are not sitting with a person who offers such a trustworthy persona. Additionally, the easiest person for a salesperson to sell to is another salesperson, just like the easiest person to BS is another BSer. A salesperson WANTS to trust because they WANT to be trusted. Trust is their easy button.
This is why a PAUSE button needs to sit beside the EASY button. Hit the PAUSE button and ask yourself some hard questions. Get a third-party evaluation if necessary. I have seen many producer failures where the likelihood of failure was obvious even pre-hire. However, the owner liked the person so much, i.e., trusted them immediately, that they did not pay attention to the profile tests and other red flags. They ignored the objective data. It was easier to hit the EASY button and hire an extremely likeable person than to go through the mental evaluation and emotional pain of not hiring someone you like and knowing you must find an alternative. It is easier, but not smarter, to just roll the dice.
Knowing who to trust and what to buy is difficult when you do not have much experience with the product. I bought a big machine. I had never used this kind of machine and had no one to ask about which brands were the best, what features I should consider, and so forth. I was reliant on the gospel of the internet.
The reviews of the brand of machine I bought were high and yet my machine broke repeatedly. It was poorly constructed and poorly engineered. The machine was designed for light and infrequent use. The internet reviews were from people who used it lightly and infrequently, but I had no way of knowing this upfront. My due diligence was entirely inadequate and I too just wanted to trust someone's recommendation.
I have a seminar where I outline in a paint-by-number process the steps and specific resources needed (including naming consultants I consider trustworthy and highly competent) to aid agencies in hiring and developing producers successfully. No one mentioned in the seminar pays me anything for recommending them in my presentation. In the seminar I bluntly state that a high success rate is entirely dependent on hiring out each segment to these true experts. The audience's reaction? Many critiques stated they disliked the program because my recommendations would require too much work. The audience members were looking for that EASY button.
Would they have preferred a pretend easy solution that is doomed to fail? I think some would prefer that and plenty of advisors offer them. Those agents are the perfect future victims of predators selling easy solutions.
Other fun examples of choosing the EASY button without adequate due diligence include:
Being impressed by a big agent/broker because they are big without ever pausing to consider that the broker has never made a profit. Is it better to be medium sized and highly profitable or huge and unprofitable? Moreover, what if that broker is highly indebted? Let's think this through. Is it more impressive to build a medium-sized agency that is growing at a solid pace with a high profit margin or be a large agency that borrows lots of money and loses money every year?
Listening to a sales consultant advise the need to break the incumbent's relationship by building a better, gap free insurance program without knowing anything about coverages. How exactly is that going to work? I ask because the need to possess a deep enough coverage knowledge to use this strategy honestly is often not mentioned in these programs. The strategy makes sense but is useless if key required ingredients, like knowing where the coverage gaps are, are missing. It is like an insurance company strategizing to beat the competition in some market without possessing the surplus with which to write the business. However, if sales consultants listed the prerequisites needed in order execute their prescribed strategies well, no one would hire them because their audience wants the EASY button. The consultants are shrewd about telling people what they want to hear.
Joining a network based on all the cool tools and toys the network seems to offer even though the agent does not know how to use the tools. Or, the tools are cheap.
Selling your agency to a buyer because you like them. Do your due diligence because the buyer's representative is not likely to be the person to whom you will be reporting post sale.
Agency owners have so many hats to wear, some of which they likely abhor, but they have a responsibility to the agency, employees, carriers, and of course, their clients. The EASY button can feel so good to hit, but it usually does not work. If something seems too easy, it probably is not going to work.
My best recommendation is that if you really need an EASY button, you probably need to hire someone else to do that particular job. The agencies of today need to hire quality management people at lower revenue levels than I have ever seen. That person, especially if they are not a salesperson, can be your PAUSE button and extremely complimentary to your skills thus enabling your agency to achieve true, hard earned success much more surely than success can be had chasing silver lures.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.
None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.