Insurance distributors have worked hard and have been coached hard to appear as professional as possible without actually crossing over to the "professional" standard of care for E&O purposes. I do not believe this approach has served the industry well, though it has allowed pretenders to proliferate and make good money.
The pressure to be an amateur agent is greater today than ever before and from a new direction -- cost. You often will see the pressure to be an amateur camouflaged as "transactional" business. Transactional business is business where no professional services are rendered. The agent is simply processing a client's order. This is also known as order taking. From an E&O perspective, court after court after court has reasoned that order taking agencies have a low standard of care (some states are significant exceptions). Just find a policy that meets the order the client has placed, do not steal their money, or lie to them, and you should be safe.
Pretend to be super professional but really just take their order and you will sell even more, just do not cross the line of actually promising professional level service.
What has changed is that the industry can no longer afford to pay pretend professionals professional level money. I read a pretty good agency's website and it had a statement to the effect of, "In today's buyout world, the pressure to reduce clients to transactions is intense." That statement is so real! At the prices being paid and the mandates the buyers have for maintaining high EBITDA margins, they cannot afford to provide high-quality services to all clients. Professional level service costs more whether it is in the value-added services or the quality of the people employed to service the accounts, or sometimes the number of people available to service accounts.
Many people who have sold or were employed by an agency that sold insurance are just sick to their stomachs about how clients are now just transactions in cost saving measures. The buyers really have little choice. Their advertising remains smooth, so in many ways some are even greater pretenders now and have become good wordsmiths.
From another angle, carriers cannot afford to pay transactional agents the same commission rates as they have in the past. Their pressure points are intense today, more intense than I have ever seen. They also see how the quality of the agencies, especially agencies that have been bought out, has deteriorated. They look at this and wonder why they should pay full commission when the following is true:
Their brand is being tarnished due to lower quality agency servicing.
Their value is being reduced to a number on a spreadsheet.
Their opportunities are being limited by what some software says one carrier will pay versus what another carrier will pay.
Their resentment of the pay to play/baseball bat approaches.
The fact carriers may not really need agents at the same level given some of the software being developed.
Why pay full price when the value delivered is only worth about 60% of the commission?
That same agency's website made such a brilliant point that they are truly committed to being professional and not being transactional. When I met with them, their commitment was real. My hat is off to them.
The reality of what is happening is 100% predictable. That it took this long is amazing. Carl Shapiro laid out exactly what develops in every industry in his article published in The Bell Journal of Economics in 1982 ("Consumer Information, Product Quality, and Seller Reputation," Carl Shapiro, The Bell Journal of Economics, Vol. 13, No. 1 (Spring 1982), pp. 20-35.). The solution if you are to avoid the race to the bottom of being a low cost, pretend professional is to become a true professional on a boutique level. It is the only option.
What is beautiful about this option is:
You deliver real professional value.
Your clients actually benefit from your professionalism.
You change the competitive score so that being smaller works to your benefit.
You become much more attractive to employees who care about their work. Many people in this industry are looking for employers who actually care about their clients enough to walk the walk.
Your carriers win. You win. Your employees win. Your clients win.
I mention carriers because many of my carrier clients are frustrated with the way they are being treated and even how their insureds are being treated. However, they are not exactly sure how to work with high quality boutique agencies that actually meet the professional standard of care. They just have not had much experience working with truly professional agencies, but they seem to be willing to explore the potential.
Knowledge of how truly professional agencies operate is sorely lacking among those agents aspiring to this elevated position too. Many policies and procedures must change. Compensation structures must change. Services offered must change. These three items are somewhat mechanical in nature.
Often the most difficult change is in advertising and marketing. The pretenders have poisoned the water so that consumers do not know how to differentiate between a pretend professional and a true professional. Pretenders aim to confuse consumers so they think they are getting good quality at a better price when in reality, the quality has materially eroded. I just had an experience with a now private equity owned non-insurance firm that fits the bill perfectly.
Therefore, how do you emphasize the fact that you are a true professional when often the pretenders' advertising is much better? One fact is that pretenders for the most part have to rely on marketing. Marketing favors size. Selling favors true professionalism. In college, sales and marketing should not be a combined class. Students should take a sales class, a marketing class, and a class relative to the distinctions and symbiotic nature of both subjects.
The key is to de-emphasize marketing to the extent possible and compete on sales instead. You get to tell your superior story more fully in a sales setting than in a marketing setting.
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.