Republished with permission from Chris Burand
To read more articles by Chris, visit Burand & Associates
I read a glowing review of Berkshire Hathaway’s Three Question Commercial Application by one of their new clients. He wrote that the entire process was fast and easy. He was really pleased. Fast and easy is important for success in many businesses.
Then I reread Chris Boggs’ (Vice President of Agent Development, Research and Education for the IIABA) review of Berkshire’s three-page commercial insurance policy (now about 35 pages because, and I am guessing, their attorneys discovered a three-page policy is not realistic). I recommend everyone who cares a lot about quality coverage read his article. It is available here: Virtual University | Warren Buffett Champions an Inferior Product) (independentagent.com).
What is quality? Is quality a super-fast, easy to process insurance policy with lots of potential coverage gaps (relative to other available forms) or is it a policy with better coverages, coverages that are important, but require more upfront time and inconvenience with the result that better coverages can be made available? I guess to some degree, the answer is a timing issue. Save time upfront but risk losing time and money if an uncovered claim occurs. As with everything, a trade-off exists. I often ask people to name the fastest animal. Most people respond that the fastest animal is the cheetah. Few people ask the key clarifying question of, “Over what distance?” A tradeoff exists in nature between fast bursts of speed versus long distance speed. A tradeoff always exists with everything.
This article is about good coverage that requires more time to design. More time is required to identify the coverages a client needs. More time is required to build a policy that meets those needs. Policies should be built through endorsements, even homeowners policies and BOPs. Inadequate coverage is easy to develop, which means it is speedier to offer. I am not suggesting the policy cited above is sloppy, but that a lot of agents are sloppy, that some carriers offer subpar coverage, and that some carriers are amazingly smart about how to carve out coverages in ways most agents will only discover after they get an angry call from a client.
How do you define quality? Fast? Lots of price options? Or sitting with a client and building customized coverages just for them? The place to begin answering this question is to identify what your clients value most. Are they the stereotypical contractor who never has time to do anything right and simply wants proof of ANY insurance? Do you ever wonder about the quality of their construction and therefore, whether the risk of suits against them that will affect your loss ratios make it worth writing them? Or are your customers people who want the right coverage enough to take the time to answer questions, including tradeoff questions between price and coverage?
Look in the mirror and honestly answer what kind of person you are. The answer is not just one of conscientiousness. I met with an estate attorney and an agent who had teamed up to provide estate solutions for clients, which made sense for all involved. Both were quite conscientious, but neither had a clue what coverages were contained in the insurance policy they were selling/advocating. They were very convincing in their sales pitch, and I am of the opinion they believed every word they spoke. However, they did not understand how the coverages in the policy actually worked and would not understand it, until something went wrong ten years down the road.
What kind of person are you? Conscientiousness and attentiveness to your clients’ coverage needs is the first requirement for providing quality coverage solutions. Having the knowledge and being conscientious enough to think through how coverages work is the second requirement. One without the other is fairly useless and often worse because you risk leading people to the wrong solutions through baseless confidence.
Baseless confidence seems to be excessively common in today’s world. A young person was interviewed on my local news channel as a result of her efforts to make the world a better place. Her emphasis involved applying technical knowledge such as required to solve medical/environmental issues. She stated she did not have the required education, “but no one could doubt her genuine goodwill to make a difference” and she was completely confident she would succeed. Her confidence was baseless because she did not know what she was doing. Intentions do not equal competence. Would you trust an auto mechanic who had never worked on brakes to fix your brakes because he was was confident his intentions were a good substitute for competence?
Look in the mirror and determine whether you possess both qualities. If you do not yet have the education, how hard are you willing to work to obtain a good education, one that includes thinking through the real world applications for your customers?
Are you willing to give up trying to work with clients who do not care? For some agents who need the money, or think they need the money, the drive to work with everyone trumps all else. Some clients simply do not care about coverage and nothing you do will make them care. Even after being hit with an uncovered claim, they may not care. Can you walk away from those prospects? Do you have the willpower required to walk away?
If you have the education and good intent to do a professional job, do you also have the willpower to charge extra fees? You need to charge extra fees and should charge extra fees because you are now worth more. It makes absolutely no sense, whatsoever, that in this industry agents are paid the same regardless of whether they sell inadequate coverage or they sell quality coverage. The commission percentages are the same (which makes one wonder if carriers care whether or not their agents sell quality coverage). It takes more time, more talent, and a select prospect pool to sell quality coverage.
There is no reason to not charge fees for the higher quality of your services. There are many myths that exist regarding agents not being allowed to charge fees, and so forth. Charging fees is a complicated subject that varies considerably by state. I have not yet discovered a state in which fees for providing specific quality services, provided they are correctly structured, is strictly prohibited. Furthermore, I do not have any clients who charge fees whose clients are unhappy about paying the extra fees. Those clients appreciate the extra value they are receiving.
We need a tradeoff in this industry between agent compensation for quality service and easy, run of the mill service. We have easy applications and complicated applications. We have easy to read policy forms and difficult to read policy forms. Tradeoffs exist between these choices. If the reader wants to offer quality coverages rather than easy applications and simple forms, compensation differentiation is the next step because easy does not equal building bespoke coverages that fit to each client’s needs.
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