Stop Selling Commercial Lines as if it were Personal Lines
Updated: Aug 25, 2020
Some prospect calls Agency X to insure their home and auto. The CSR gets the data required to determine the replacement cost on the house, asks about liability limits, and hopefully recommends appropriate endorsements (but probably does not in the real world beyond replacement cost).
Business A calls Agency X, or better yet, a producer in Agency X calls Business A. Let's name the producer "Joe." Joe solicits Business A and gets the opportunity to quote the account. Joe gets the replacement cost data for the building, maybe an equipment inventory, asks about liability limits, and maybe, hopefully, recommends certain applicable endorsements and workers' compensation coverages. Excluding the worker's compensation policy and the additional complexity of the building dimensions and contents, the producer is approaching the account just like a personal lines account. Some coverages are different. Liability limits are usually, hopefully, higher. Maybe more questions are asked to ascertain the business's exposures, maybe not though. I see many producers forego such questions. This is how business after business after business ad nauseum is sold insurance. A whole lot of producers are asking, "What's wrong with this?" Here is what is wrong:
Businesses have far more exposures and property is often minor compared to their liability exposures. But the focus is so often on the tangible property, just like in personal lines. But businesses live through cash flow and therefore, the primary focus of business insurance should be on coverages that protect cash flow. Many producers do not discuss these kinds of coverages, and if they do, they definitely do not explain them well because they do not understand cash flow well. The easiest target is business income. I cannot begin to count the number of producers I have met who hesitate to even discuss business income because they do not understand it. Here is an easy solution: Take a high quality business income class!
Additional solutions include asking good questions to understand how a business's cash flow might be interrupted. Sure, a fire would be a problem but that exposure is usually relatively easy to address and damaging fires are rare. A variety of law suits is more probable and a GL policy does not cover all kinds of suits.
The owner dying or being injured severely on the job, driving for example, but not having worker's comp on themselves to save a few bucks might be a huge exposure. I saw an agency once almost go bankrupt because the E&O claim related to just this sort of situation. If you don't do it for your clients, maybe do it for yourself?
Understand the client's key contracts. I suggest that it is next to impossible to insure a business properly without knowing what that business's obligations are (by law or contract or regulation), whether the contracts are written and signed or if they are de facto obligations. Key contracts include leases, employment obligations, security requirements (which may be contractual and legal), client obligations, vendor obligations, environmental requirements, or many other kinds of obligations. Personal lines clients do not have these kinds of contracts. Outside of car loans and mortgages, they really don't have contractual issues on a common basis.
The complexity and legal obligation differences require agents to not approach commercial lines like personal lines. Not only is it the better approach ethically, agents that sell commercial correctly increase profits!
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.