Insurance Distribution: Sloppy vs Professional
The future of insurance distribution is becoming extremely clear to me. A huge push is being made to generate as much in sales as possible with literally zero regard for insureds' actual coverage needs. I am seeing this push with specific carriers within and outside of the independent agency channel. I can easily see this within the Insurtech distribution models, and it is absolutely crystal clear some agencies are planning to grow larger quickly, both with and without Insurtech connections/branding, without regard to insureds' true coverage needs.
I do not believe anything in the first paragraph should be news to anyone who is paying attention. When an agency advertises, "This is the quote for you..." and the carrier is having to lay off policies to avoid the insurance department taking them over, or an agent who has not read a policy recommends that a client buy a policy that has so many corners cut off that it is now a circle (you cannot use four-corner logic to determine whether coverage exists in a circular policy), or when you see a "quote machine" where literally no one asks the client questions, the result is slop which should be obvious to anyone who cares enough to look.
Or, when a carrier hires a well-known consulting firm to help them minimize claims payments (this is pretty well documented in some public articles), or a carrier removes coverage without informing their agents or clients because they found a loophole in state law, or, in a situation I personally witnessed, when an adjuster willfully misread the coverage to conclude an absurd denial, the result is slop.
The concept that Insurtech has brought about a consumer revolution because it makes it easier to do business is shallow. Making it easier for consumers to choose the wrong and inadequate coverages does not constitute a consumer revolution.
Or consider the model whereby a direct writer usually, but some independent agency carriers too, appoints or prefers agents who do not know what they are doing because ignorance makes the agents seem more trustworthy. I watched a movie about a Cold War spy case where the British chose a salesman as a secret message courier because he was "not bright". In one of the best lines, he was called a "Great Amateur". The salesman turned out to be amazingly courageous and honorable and I hope he received a medal and award from his government.
In the movie, after his arrest by the Soviets, he described himself as, "I'm a salesman. I want my customers to like me." From many perspectives, if a carrier can get an insured to believe they are the greatest and have salespeople who are ignorant and primarily focused only on getting clients to like them, sales can be increased. This phenomenon is based on the salesperson's genuine, if unwarranted, belief that what they are doing is great. They are a straw horse, and the strategy often works for the carrier, sometimes the agency (assuming they are not hit with E&O claims) and, provided the insured does not really need their insurance, i.e., they don't have a claim, it works for the insured too.
Insurtech and carriers are using the same strategy when advertising by using animals and idiots to trumpet their products. It's an innocent, if incompetent from an application of correct coverages, strategy. Humans are not afraid of incompetent people and time after time do business with them even if they know they should not do so. This goes for doctors, attorneys, and politicians too.
Some people might be upset reading this depiction. I am upset too, so I am writing about it. Insurance is one of the greatest tools ever invented to help people rebuild their businesses, homes, and lives in times of crisis. The slop described above greatly dilutes the value and damages the images of those carriers and agents trying to do what is best for their clients. I know many agents who live to help their clients. I know carriers who, throughout their culture, really believe that they are there to help their insureds to the extent of what is written in the policy. These are wonderful people who are representing the industry well.
However, there is big money behind the slop. One reason for abundance of funds is because it is far, far easier to scale slop. In the insurance world, quality requires an agent to spend time to discover and uncover their clients' needs. The whole idea of insureds figuring out their own coverage needs is ludicrous and anyone who has ever sat with an insured and gone through coverages and exposures knows just how silly and misleading this assumption is. Insurance contracts are not 30 pages long because choosing the right coverage is simple.
Being a professional and truly taking care of your clients has great opportunity because many people and businesses do want professional advice. But it is harder than ever to be a professional. The forces are blowing against the true pros and many people prefer the industry to consist of "great amateurs."
The great professionals will need to do the following to win:
Focus on clients who want professional level service.
Charge the right amount of money. Normal commissions are inadequate for the value you bring.
Know your coverages far, far better than is the norm with other agents.
Develop much stronger communication skills:
The ability to translate difficult coverage language into language that insureds understand.
Improve, through training, verbal, and written communication skills for one-on-one communication.
Improve and develop far better speaking abilities.
Develop the tools/skills required so that customers understand you are delivering more than an insurance policy. Any amateur -- even bad amateurs -- can deliver insurance policies. The difference between you and the amateurs must be the delivery of the right policy with the value proposition that goes with the right coverage and risk management recommendations. The entire list and development of these options is about a 40 hour program so this is not the place to go into detail.
The professional must truly care about their clients' well-being. I am sure some amateurs care, but they do not truly care. The difference is simple. Many people are heartbroken for others when something bad happens, but they don't do anything to help. A person who truly cares about their clients' coverages will do everything they can to convince those customers to buy the coverages they truly need. They will learn the coverages. They will learn to describe the coverages in a manner that clicks lightbulbs in customers' minds.
The professional will take the time to talk to their customers.
I see some agencies already using this professional (if not fully developed) model and it works well. They'll continue to have a long, prosperous career because the big money is not targeting truly professional agents. The big money is going after the great, and not so great amateurs.
The future is pretty obvious and it is a two-way fork to the future. One road is short and one is long. Which path will you choose?
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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.