Property/Casualty, and even Benefits, insurance, as practiced, is often sloppy. In many cases, quality is not a true concern. I know that everyone professes quality is critical, but quality is often not reality. I’m surprised that the sloppiness of our industry doesn’t receive more attention. The good news: Sloppy industries are ripe for agencies that can deliver quality!
Let’s first establish the extent of the sloppiness. Insurers manufacture only paper and when claims occur, they manufacture checks and legal defense. Some sophisticated agencies manufacture loss control (risk management) The industry does not manufacture complex machines. In fact, even the forms used are usually standard, boilerplate commodities. Yet, there are insurance companies that can’t print and mail, or even e-mail a policy before the effective date, even on renewals where nothing changes. These policies are not merely a day late, a week late, or sometimes even just a month late. I have personally received my business owners policy (BOP) renewal nine months late. That’s a longer delay than a space shuttle launch. Keep in mind the complexity of a space shuttle. My BOP had one custom item: my name. That’s sloppy.
Agencies spend small fortunes checking insurance policies delivered by carriers and brokers for errors. They do this because the error rate is still too high. Years ago, after writing an article about carrier error rates, I received a call from the head of quality control for a major insurer, told me that her company never made mistakes. I have told this story many times to agents, especially agents who represent this company. They roar with laughter; they know better.
One reason this industry is so sloppy is that denial is the favorite reaction of too many insurance executives. Of course, this makes these companies vulnerable to smarter competition because it’s tough to provide good customer service when your head is stuck in the sand.
A smart insurer that provides timely, accurate policies would create a competitive advantage for itself. Too many companies still don’t understand that if they want to grow, they need to be easy firms with which to do business from a CSR’s point of view, as well as from the customer’s perspective. Some carriers are too busy paying more money to agents to get the business. In many of these cases though, agents don’t benefit because they spend the extra money they make on the extra service work required. Some companies are even too busy stealing their own agents’ accounts because they’re desperate for growth. Implementing true quality would be a better solution.
Agents are also guilty of sloppiness. Not completing applications is sloppy. Not documenting files is sloppy. Renewing policies “as is” year after year after year is sloppy. Not offering material coverages is sloppy. I’m a huge proponent of coverage checklists, so I can’t comprehend agencies not recommending that all Commercial clients at least purchase such basic coverages as Employment Practices Liability Insurance, Equipment Breakdown, Business Income, Workers Compensation, and Umbrellas. However, possibly a majority of producers don’t offer these coverages regularly. This is sloppy.
Many people rationalize sloppy behavior with plenty of reasons and excuses. However, the bottom line is that this is sloppy behavior. How else can you define not completing applications when this is your job? I suppose you might consider this lazy, rather than sloppy. Either way, what happens to lazy or sloppy companies?
How else can you define “renewed as is for five year” without ever talking to the client? It’s not because the insured doesn’t want to talk - no one has asked the client to talk about their renewal. Let’s suppose that no discussion is necessary. If that’s the case, the agency doesn’t need to pay any commission because the producer hasn’t done any work!
A popular sales book, Randy Schwantz’s The Wedge, is worth reading. Randy makes the key point that our industry is so sloppy that a producer can easily use the incumbent agent’s sloppiness as a wedge to separate clients from their current agent. It makes sense.
Let’s say that you’re an agency owner who doesn’t want a sloppy agency. Look at your producers. Do they follow your agency’s procedures? Do they work their renewals? Do they offer the coverages they should be offering? If not, you might not want a sloppy agency, but you’re tolerating sloppy practices.
If you don’t tolerate sloppy, lazy behavior, how can you turn your superior performance into a competitive advantage? Ask prospects what their agent is really doing to earn their commission/fee. Be prepared to show all the work you really do. Track your error rate, improve upon it, and show the results to your clients and prospects. Show that you work all renewals. Let your clients know that because you care about them getting the right coverages, you require offer coverage checklists to all accounts. Show that your people are educated. Show that you work and don’t take short cuts. Times are tough right now and eventually, the cream always rises to the top.
NOTE: 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.