Commoditization: Who's to Blame?
Agents are a good target for the blame. I saw a question posted by an experienced agent: "Does an umbrella policy cover…?" The question indicates such a depth of ignorance any answer is simply wasted. There are about 500 or maybe even 5,000 umbrella forms in existence. Hopefully this experienced agent is not treating all these forms the same, but that is what the question tells me they are doing.
I saw another question posted, "Does a homeowners policy cover…?" At the very least, differentiate between an HO-3 and an HO-5 or an ISO form versus a carrier specific form. This is agent incompetence painted bright red for the world to see. I agree, there are no stupid questions but certain questions definitely indicate stupidity or at least ignorance and in doing so, these agents create commoditization. If an agent does not differentiate key points when asking a technical question to educated peers, they certainly are not differentiating coverages and coverage options when selling to the public. "Ok, you need a homeowners policy? That will be $695.99. Would you like to pay in full or use our monthly pay plan? Oh, I forgot, would you like fries with that?"
If agents and CSRs do not know or cannot articulate key differences in policy forms or even discuss exposures with the public, then the public has NO REASON to know insurance is not a commodity. The result: Insurance becomes a commodity. Then the same agents, companies, and associations cry about the commoditization of insurance. If insurance is not sold correctly, no other outcome is possible.
The phantasmagorical opportunity created by this ignorance and incompetence is only for the best agents with the strongest stomachs and/or for those who need immediate gratification daily. Step up and be bold. Tell the world how great you are by advertising you are professional and then be professional. Tell the world how you will analyze their exposures in detail and then do it. Tell the world you will work with them to identify the best forms for their needs and then do it, all the time, every year the client answers your request to meet with them.
I know the E&O people tell you to not advertise that you're a professional but this is because they are thinking of the incompetents who cannot be professionals. Their advice makes sense for the incompetent. If you are not a professional or you are but don't follow through, then do not advertise that you are a pro. (As an aside, is it not odd that an agent has the option of not being a professional? Can you imagine saying to a doctor or lawyer, "Don't advertise that you are a professional doctor if you really are not professional?" Isn't it sad this industry even has this situation?)
However, if you are a professional and you do your job, your risk of being sued simply for advertising that you are a professional is much lower because if you are doing your job, the odds the client will have an uncovered claim are much lower than if someone who does not differentiate between umbrella forms sold the same person the wrong policy. If you are a pro, do not build your advertising, marketing and sales strategy using an E&O attorney's advice when that advice is geared to the lowest common denominator! It takes guts but it is fun.
Next, disclose your compensation. You know what you pay when you hire professionals so why should your clients not know what you're paid when they hire an insurance professional? Compensation disclosure is a statement that you are confident of what you are doing. Amateurs hide. If I did not know the difference between homeowners forms, but I was selling homeowners forms, I definitely would not want prospects to know what I was making! Even if I was only making a penny per policy sold, it would be a penny too much!
Require real technical education and valuable certification for all your people. Do not permit them to take the "Three hours of CE credit in 15 minutes for $49.99! Plus if you buy now we'll throw in another hour of CE credit for FREE! Wait, wait, That's not all. If you pay in full, you will also get this FREE pocket size encyclopedia containing everything you need to know about insurance. BUY NOW!"
Mandate they obtain real education so they can communicate with clients the key differences in coverages from one form to another. Make your employees and producers gain the knowledge they need to see exposures and then know what other forms need to be discussed with clients. Take the steps required to boldly exhibit your knowledge, your professionalism, and your expertise because those are values worth buying. No one needs to pay an agent for a commodity. Everyone that wants insurance (versus those consumers who couldn't care less about insurance and simply want an auto I.D card or a certificate of insurance) needs an agent who is professional, smart, and will work with them individually.
Step up and differentiate. Avoid commoditization and the poor profits of commoditization by being or becoming a true professional!
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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.