Provide Risk Management — Not Insurance!

by Chris Burand

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 strongly 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 my mind. This places insurance people in some fine company!

So how do agents overcome this horribly negative connotation? Independent insurance agents must stop selling insurance! No future exists in selling insurance. It’s a dead-end game. The future lies in risk management, where an actual insurance policy might or might not be involved in minimizing a client’s risk.

Until now, many agents haven’t adequately assessed their clients’ risks. As a result, they’ve done a really poor job of minimizing these exposures. For example, the Inc. article went on to describe a company with 60 employees that spent $75,000 on insurance annually. The company’s broker doesn’t appear to have ever completed a renewal questionnaire; instead he always renewed the account 'as is.' The company paid premiums on four vehicles when it only owned three, had employees classified incorrectly, and had a policy it didn’t need (according to its new broker — I hope he had a big E&O policy). The company cut $10,000 from its premiums, but more importantly, the client — not the agent — instigated the renewal reviews!

The agency, and in particular the producer, should be doing reviews annually, especially for accounts of this size. It’s the producer’s job to review the risk every year. This is why they get renewal commission. If they don’t do it, why pay them renewal commission? Anyone can renew an account 'as is.' It’s the producer’s job, not the client’s, to make sure all property is insured and that property that doesn’t exist 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.

Identify risk-mitigation alternatives. The alternative market 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 last 18 months, I’ve seen a very fine agency lose several of its choicest accounts to other agencies offering alternative market solutions.

Because many producers fail to adequately minimize their clients’ risks and fail to review risks annually, great opportunities are available for the taking. For example, auditing clients’ insurance coverages could be a great fee-based service. Agencies have found that such activities can be very lucrative. Also, clients don’t consider such a service a nuisance, because you’re saving them money, rather than taking their money.

Minimizing customers’ risks is the future. Customers don’t want to buy insurance. They want someone to help them minimize their risks. Minimizing risks involves solving problems. In today’s complex business world, an insurance policy is only part of the solution, and because it’s only part of the solution, there’s no future in it. We have to provide the entire solution.

Chris Burand can be reached at Burand & Associates, LLC, PMB 345, 1829 S. Pueblo Blvd., Pueblo, CO 81005, (719) 485-3868, fax (719) 485-3895, e-mail [email protected], or Web site www.burand-associates.com.