Disclosure in the insurance industry is a reality. Everybody’s going to have to do it. Jack Burke recommends that you take a deep breath and start disclosing everything.
OK, let’s all settle down. In the post-Marsh & Mac era, disclosure is a reality. There’s no getting around it. Everybody’s going to have to do it. So, take a deep breath and start disclosing everything.
Easier said than done, isn’t it? Actually it’s easy. It boils down to choice: You can either run around like Chicken Little crying that the sky is falling — or you can put on paper the basic standards of integrity under which you operate your business anyway. Your clients and prospects know that you get paid commissions. They understand sales incentive programs. They understand (and actually appreciate) bonuses that you might earn by selective underwriting of good accounts that make for profitable business. None of this comes as a surprise to them, so why do you feel that it needs to be kept secret?
Over the years I’ve learned two things: 1) Secrets kill and 2) truth wins.
LEARN FROM HERTZ
In a prior life, I managed the Hertz car sales division for North America. The government got into the business of business back then, too. At that time, governmental bureaucrats took Hertz for allegedly bilking the public by selling “bad cars” that had been involved in accidents.
Just as Spitzer has learned, the court of public exposure is far worse than any court of law. Although Hertz had obviously sold cars that had been repaired after accidents (many used vehicles have an accident in their history), all allegations of premeditation or fraudulent practices were categorically denied. Yet, negotiation was far less expensive than judicial defense. As a result, Hertz settled with the government by entering into a Federal Consent Agreement without acknowledging any wrongdoing. The agreement required disclosures to the buying public.
Back then, Hertz had a fleet of a little more than 100,000 vehicles. This fleet had to be turned every 12 to 18 months in order to continually provide renters with new vehicles. With that many vehicles to sell, our first reaction was to wring our hands in despair. After all, the used vehicle industry was built on the principle of “ buyer, beware” — not disclosure. How could we possibly sell cars by telling the truth?
After much reflection, we finally came to terms with the requirements of the agreement. We could either hang our heads while begrudgingly offering up this information to potential buyers — or we could make the proverbial lemonade from lemons. We chose to make lemonade. To make a long story short, we turned the restrictive covenants into a marketing campaign that proactively positioned us as unique and honest purveyors of used cars.
The agreement stated that we couldn’t retail any vehicle with frame damage repair exceeding $100. Regardless of frame damage, we couldn’t retail any vehicle that had had body repairs in excess of $1,000. We also had to make available the entire service history of the vehicle upon request.
Our marketing campaign used this message:
- See the entire history of the vehicle you want to purchase — before you buy it!
- We will sell no vehicle that has sustained more than $100 in frame damage!
- We will sell no vehicle that has had major collision repairs!
Then, to safeguard against future complaints, we added our kicker: If anyone felt that they had purchased a lemon, we would allow them to bring it back and either pick out another vehicle or get their money back.
Consumers loved our new marketing and policies. The rare instances where we took back a vehicle were inconsequential in comparison to the effectiveness of our marketing. Everyone (except our competitors) came out a winner!
An interesting development also occurred on the sales lots. Our salespeople reported another benefit to the marketing. Apparently, customers would frequently ask what happened to the cars that we couldn’t sell under these policies. The salepeople simply replied, “We wholesale them and they eventually end up at other used car lots around town.” (There’s nothing like putting a giant question mark in the mind of a shopper!)
Don’t fear disclosure; embrace it! Be proactive with your disclosure and package it in such a way that your clients and prospects deem it to be of value. Use it to reinforce your intentions to work in the best interests of your clientele. Turn lemons into lemonade!