The future of your agency lies in offering risk management - not just insurance.
THE PROBLEM:
An August 2000 Inc. article titled “Bug Your Broker: Vigilance Lowers Insurance Costs” began, “Insurance costs are a nuisance for every small-business owner.”
Think about that sentence and what it implies: That insurance is a nuisance and every small-business owner must pay for a nuisance. What other nuisances do clients pay for? Ambulance-chasing attorneys come to mind. This places insurance people in some fine company!
To overcome this negative connotation, independent agents must stop selling insurance! It’s a dead-end game. The future lies in risk management, where an insurance policy might or might not be involved in minimizing the client’s risk.
Until now, many agents haven’t assessed their client’s risks adequately. As a result, they’ve done a poor job of minimizing these exposures. For example, the Inc. article described a company with 60 employees that spent $75,000 a year on insurance. The company’s broker doesn’t appear to have ever completed a renewal questionnaire; instead he always renewed the account “as is.” The result: The company paid premiums on four vehicles when it only owned three, had employees classified incorrectly, and had a policy that it didn’t need (according to its new broker). I hope the previous broker had good E&O coverage. The company cut $10,000 from its premiums — but more importantly, the client, not the broker, instigated the renewal reviews!
THE SOLUTION
Every agency, and in particular every Commercial Lines producer, should be doing reviews annually, especially for medium to large-size accounts. It’s the producer’s job to review the risk every year. This is why they get renewal commissions. If they don’t do it, why pay them renewals? Anyone can renew an account “as is.” It’s the producer’s job, not the client’s, to make sure that all property is insured and that non-existent property isn’t insured. It’s the producer’s job, using mandatory coverage checklists, to identify all the coverages their clients need. Simply quoting the coverages the client already has is lazy and unprofessional. The goal must be to minimize the client’s risks at an optimal price.
It’s your responsibility to identify risk-mitigation alternatives. The alternative marketplace already has almost 50% of the Commercial market. Have you offered your clients alternative market solutions? If you don’t, someone else will. In the past 18 months, I’ve seen a very fine agency lose several of its choicest accounts to other agencies that offered alternative market solutions.
Because many producers fail to minimize their clients’ risks or to do annual risk reviews, great opportunities are available for the taking. For example, auditing your clients’ insurance coverages could be a great fee-based service. Agencies have found that such activities can be very lucrative. Clients don’t consider this a nuisance, because you’re saving them money, rather than taking their money.
Your future lies in minimizing your clients’ risks. Customers don’t want to buy insurance — they want someone to help them minimize their risks, which means helping them solve their problems. In today’s complex business world, because an insurance policy is only part of the solution, there’s no future in it. It’s your responsibility as a professional to provide comprehensive solutions through risk management.
Action Step:
Have your producers do a pre-renewal review of every Commercial Lines account for uncovered exposures.