Insurance as a Commodity? Addressing Our Industry's Biggest Challenge

#1: What Would Jack Hungelmann Do?

Insurance coverage is confusing, and no one in our industry is better at making confusing concepts clear than the previous author of this column, Jack Hungelmann. All who interact directly with consumers should own a copy of Jack's book, "Insurance for Dummies," and use it to improve their ability to help consumers better understand how to buy the protection they truly need. Further, the 37 columns authored by Jack and made available to IRMI.com readers are a treasure trove of practical solutions on how to differentiate and strategically structure insurance coverage to meet your clients' protection needs.

#2: Start with the End in Mind

In his book, The 7 Habits of Highly Successful People, author Stephen Covey reminds readers of the importance of starting any endeavor by first focusing on the desired end result. The Chubb Group of Companies has a pithy advertising campaign aimed at focusing consumers on seeking value and considering the future implications of their buying decision that uses just eight words: "Who insures you doesn't matter, until it does."

Help consumers understand the possible future implications of their decision by reminding them that, in the event of a large loss, the insurance coverage they are purchasing will likely become the most important item they own. Why not use Chubb's clever words to remind consumers that who insures them, and how their coverage has been structured, will matter greatly after a loss.

#3: Fixing $6 Haircuts

A popular television advertisement a few years ago featured the owner of a local barber shop who was losing customers to a new national chain barber shop that had moved across the street and was attracting customers with a big banner announcing "$6 Haircuts." Several weeks later, the local barber went to the office supply store and hung his own banner, proudly announcing, "We Fix $6 Haircuts."

I have had the chance to meet with and interview many in our industry who are very effective at helping insurance consumers to fix the equivalent of $6 haircuts. Among the shared characteristics is a passion for providing their keen insights about the value and worth of different insurance products. They are also quite direct and assertive with consumers about what they know to be true and offer a refreshing contrast to those in our industry who are either passive or pandering. The very best interact with consumers as if they are on a mission—a mission to correct dangerous misconceptions about insurance, bad advice from well-intended but ill-informed friends, and the wrong-minded messages conveyed by many national advertising campaigns.

#4: Watch Your Language

After working to secure a coverage offer that meets a consumer's protection needs, referring to it as a "quote" or "bid" only serves to place all of the emphasis on the cost of coverage. When a consumer asks for a quote or bid, explain that you will provide them with an entire coverage offer, and that as part of reviewing all of the terms of the coverage offer, you will of course clearly identify the annual cost as well. This is more than mere semantics. To change the discussion, we must use words that describe something more substantive and meaningful than the "quote" that was asked for. We also need to avoid arcane insurance terms and acronyms and the use of glib bromides when speaking with consumers. Advising consumers that a policy provides ACV, extended replacement cost, APIP, or "all the bells and whistles" imparts little insight on the protection being offered and causes consumers to focus instead on what they do understand—the cost. Using words that are clear and specific that consumers can relate to will help promote a meaningful dialogue.

#5: Document the Differences

Although insurance consumers have been preconditioned to focus on cost and not protection, they also appreciate the need to be wary of offers that look too good to be true. To help consumers see through the often protection-poor coverage provided by save-money-now policies, take the extra time to document the coverage that is—and is not—being provided by different policies. Average agents focus merely on the coverage limits on a declarations page. Agents who are on a mission to help consumers make well-informed decisions take the extra step to document the actual types of losses that are and are not covered by different policies, while also explaining how variances in the loss settlement provisions of policies will determine how claims are actually paid. When doing this, strive to be concise and clear, and avoid jargon.

#6: Provide a Process Focused on Risks and Solutions

The common theme behind most insurance advertisements and sales strategies is to convince consumers that the policy being offered is a "better deal." The better deal focus prevents consumers from examining their risks and developing a worthwhile protection plan. Knowing what you know about insurance, would a better deal product pitch appeal to you if you were suddenly employed outside the industry and in need of insurance? Not me.

What would interest me? Someone who offered me a well-designed process that helped me understand and examine my exposure to different losses. Once I understood my risks, I would greatly value guidance in selecting solutions that protected me from the risks that concern me the most. Instead of pitching better deals, shift the focus from cost to protection by providing a "best practices" inspired process that helps consumers to understand their risks and select solutions to manage those risks. Those consumers will become clients.

#7: Offer More Than Just Insurance

Although buying insurance coverage is not the only strategy available to help consumers manage their many risks, insurance professionals rarely present other risk management strategies that are not risk transfer oriented. This insurance bias is particularly frustrating for those insurers that offer policyholders a wide range of valuable but often underutilized services to help consumers avoid or reduce certain risks. Among the reasons select insurers offer an increasingly wide range of valuable risk management services to policyholders is to further differentiate the value of their offer from the many insurers that offer only low-cost coverage.

Shouldn't insurance professionals do all they can to make consumers aware of the noninsurance strategies that are available to help prevent or minimize losses? When available, these services are yet another way to demonstrate that the value of insurance policies differs by more than just cost.