There is a quote from Warren Buffet that I want to put on my wall and send to all my colleagues: “Price is what you pay. Value is what you get.”
Agents, brokers and underwriters should heed Mr. Buffet’s advice. I’ll bet if I asked agents whether they are selling price or value, most would say price. I base that assumption on an online survey that was recently conducted where price was the No. 1 reason my company’s program was not chosen.
If that’s true, then we’re back to treating commercial insurance as a commodity, and that’s a disservice to an industry built on relationships and to businesses across the country that can benefit from what independent agents offer. It also can be bad for your business. Selling cost versus coverage is one of the top nine reasons insurance agents’ errors and omissions claims are increasing.
This is the toughest market in two decades in insurance. Not only did the recession slash the sheer volume of available commercial accounts along with their revenues and payrolls, but the prolonged soft market has squeezed margins and reduced agency revenues.
Maintaining renewals is important, yet too many producers and underwriters are running scared – scared that giving their customers anything but the lowest price will mean they could lose the business.
I understand the pressures of the current market, but we – agents, brokers and underwriters together – need to change our thinking so our focus is not just on price, but on value. One of the best ways for agents and brokers to sell value is to take advantage of program partners – the managing general agents and program administrators that have industry expertise and valuable resources.
When you sell value, you should be selling comprehensive coverage that is tailored to the specific needs of your insured, along with risk management, education and safety services that can improve the safety and performance of the insured. This approach will improve loss ratios and experience mods, and so leads to more favorable premiums for the insured for a prolonged period of time, not just the current term.
For example, Venture Programs offers a free, industry-exclusive service, CardioReady Certification, to golf and country clubs in its Preferred Club Program. This certification ensures clubs have proper placement of AEDs, as well as training, maintenance and communication with local emergency response providers. The company encourages agents and brokers to talk to their clubs about this program.
Why? Sudden cardiac arrest (SCA) is the leading cause of death in the United States. When you study the factors that contribute to these statistics – age of the victim, time of day these events take place, and chance of survival decreasing as the time it takes for an emergency responder to administer the much needed care – it’s no wonder this is an important topic for golf and country clubs throughout the country. CardioReady-certified clubs have the ability to respond properly to SCA events protecting their members, guests and themselves. In the past nine months, more than 200 clubs in the program have been certified or are being evaluated.
There are many examples in the insurance industry. Another well-respected MGA that has an excellent program for emergency service providers joined forces with a local university to develop a distance-learning program. This program provides education on driving safety, firefighter safety, sexual harassment prevention and OSHA compliance for handling blood borne pathogens and infectious disease. Thus it improves safety and provides value to emergency service providers.
These are just two examples of the value you can provide insureds by working with the right program partners.
The move from price to value begins with us. Once again, it is time to start building and focusing on long-term relationships with both your program partners and your insureds. We all know insurance is a relationship business, so tap the resources of your program partners, and take full advantage of their specialized resources to create value for your insureds. Remember, you always have the added sales and marketing knowledge of your MGA expert when needed.
Warren Buffet is known for looking at the big picture to build long-term value. If we in the insurance business can work together to sell value, not price, we will succeed in building the long-term relationships that will sustain us in any market.