Agents - Your Clients Don’t Trust You

[hipokets]

I think there are things being forgotten here. It is very possible to go into a new client and propose the commissions vrs fees, and very likely to agree to a fee to obtain coverage for the client, and he pays the fee upfront. But, on renewal, due to E&O issues you have a duty to obtain/maintain coverage for that client. First thing, to try a fee on the renewal, is that there would have to be a notice of cancellation, agree to a fee and then place the coverage again. This can be a problem for the agency and the client, especially if he has filings. One of the problems here is that, most of the time, companies will not even release renewals until right up to the week of expiration. This is due to being overloaded. I don't know about everywhere else, but here in TX, a client can refuse to pay the fee, and if we have the duty to "protect" that client due to E&O issues in this state, and he refuses to pay the fee, and there is no commission built into the proposed program, then what? Kind of a dilemma. I think that most people talk about things like this, but they do not see the underlying current, taking in all the problems and E&O issues that could result. I also think that comparing a lawyer to an insurance agent is way out there. You go into an attorney's office, tell them exactly what you want, pay the fee, and any other accumulated fees according to a set schedule. Things in the insurance industry are not that cut and dry. Risk transfer can be done many different ways, and there is no exact certainty. Every client should have their programs tailored as much to their needs as can possibly be accomplished. I can't tell you how many different ways I've worked accounts to cover every possible nitch, read hundreds of forms. My suggestion would be, if people are so uncomfortable about insurance agents, let them go in and pay a fee, hire an experienced risk manager, consult with them about their operations and let the risk manager deal with it. That way, for sure they will know that they are getting exactly what they should be getting. The risk manager should be able to tell the client why their premiums went up or down, or suggest other ways to transfer risk. That way, the risk manager can do their specs for the account, give them to the agent, and get exactly what they need for the client. Now that would be a win/win situation.

[TomZ]

I see the logic of Scotts points.

Good discussion. Much better than reading the Farmers bashing that some seem to enjoy!

Some insureds might like the fee compensation system. There is room in the market for both.

We have been thinking about working on a fee basis. Talking - not there yet.

[sanddog]

I am so tired of this consultant BS, here's the skinny. Your dealing with a personal consultant agenda. Someone who has plenty of time to build webb site's and to promote their point of view. We brokers go to school try to achieve a CIC or better. We are in fact consultants. Large companies have a full time Risk manager. The State of Maine is one of the smallest state in this great Nation. That's wear your friend Scott the Consultant is born and raised. The exposure that "consultant Scott"

[Joe Agent]

Sanddog,

I was waiting for you to comment on this guy. Nice job.

Scott stay in Maine. The West Coast is fine the way it is.

[crossins]

The consultant's goal (at least the one leading this discussion) is to have the agent reduce their comission, and compete on a fee basis only. With that achieved, he then can demonstrate the perception of value to the client. The policyholder and consultant win with this scenario. The independent agent/broker usually loses.
I suggest to clients using the consultant to evaluate cost/benefit throughout the process, which oftentimes can last many years. In many cases, the real "value" is not there. If a large commercial insured has "issues" they should and usually do address them with their agent. If the agent fails, it is the marketplace that will correct the situation.

[scott]

Most of my clients come to me looking for advice because I don't receive a commission - they are concerned with the bias they perceive in the advice agents give -- at least that's what they tell me.

I maintain that if more agents were to work on a fee basis, fewer insurance buyers would perceive a need for my services.

A fee based insurance agent should be making more money than a commissioned agent as they are providing more perceived value to their client - perceived value by the client.

Again, not all insurance buyers want or need this approach. Not all agents will offer this approach. Some agents will want to meet the needs of this segment of the insurance marketplace. Others will continue as has been traditionally done.

My intent in this was to propose a different outlook and to spark some discussion. Its been interesting.

[aplessing]

"Fee for Service"

[Julie]

I understand Scott's point of view, especially after remembering his other posts.

I think fee's can be good in place of commission...but I also think that fees can be very bad. Take for example a recent conversation I had with our agency accountant that resulted in $650.00 worth of fees being billed....or my computer consultant who billed me $100.00 for a long conversation. When my clients call me to discuss their coverage I do not start a billing clock, but I give them the best answer that I can and if let them know the cost for coverage and then let them make a business decision. If they make the purchase then I get something financial in return for my time...if they do not make the purchase then I get nothing financially in return (tho I do get protection from E&O claims).

If our industry switches to pure fees...there is much more room for abuse then with commissions!

[Claims]

I've been in insurance from the Claim perspective for close to 38 years. If I've learned anything its to recognize when someone is trying to push a hot button. Agents, Scott is doing just that to you! There are always the good and not so good in any arena. I'm sure anyone that posts with that type of headline has an agenda. This one is obvious. I can tell you from experience that in only rare situations does an insured blame his/her agent. Any other claim folks out there that can agree that at most 1% may say his/her agent led them astray! If you all are doing your jobs there is no worry. If you are not then your customer will move to another agent. Why on earth would an insured stay with someone he/she hates! C'mon Scott. Can't you come up with a better discussion topic than this? I like to read and learn not read and waste time on a personal agenda!

[RNR_Risk]

Thanks guys. I love it! I work both as a broker and a consultant. I always give the client the choice and I encourage a consulting arrangement (fee for service) precisely because - as Scott correctly points out - there is an inherent conflict of interest in accepting commission from insurers while representing to buyers that you somehow work for them.

Oh - and the nasty remarks e.g. "...stay in Maine..." are completely inappropriate and unnecessary if you have anything substantive to say.

I think a component of all this is professionalism. I know the CPCU Society harps on the CPCU designation as some kind of indicator of professionalism [i.e. since we CPCU's have "ethics" and passed tests we must be professionals - just liker MD's and attorneys!]. But I think what the public views as "professional" is (1) a standardized course of higher education as a prerequisite to entrance in the field [lacking in insurance - I don't think anyone views CIC or CPCU courses/tests as an equivalent] and (2) compensation by client on a fee for service basis.

Of course there are professionals that abuse fees. But I think the point is - having a compensation system that aligns clients' interests with those of their service providers.

[MUD]

There is no conflict of interest! As an independent agent I provide a service to the partner-client. I do not represent them, I represent several carriers, which provide me commission as fair compensation for my work. An independent agents value is the ability to tailor coverages, make recommendations based on historical evidence, and to provide solutions to risks associated with this partner-client.

Scott's problem is his own. He believes his past clients would not do business with him on trust because he earned a commission. What Scott is really saying is that he looked at his clients with $$$ in his eyes. The clients saw it and ran. He did not solve his problem!!! He still looks at his clients as $$$ just a fixed amount now. One needs to understand his purpose in the marketplace-am I here for the money or am I honestly interested in providing a VALUABLE service in my community. If you are in business just for the money...get out and do us all a favor. Otherwise evaluate what is driving you to be successful as a business owner-form a business plan around that and go-man-go!

My argument is not against fees so much as against people who are only interested in $$$ and want to blame our customers instead of ourselves!!!!

[msidden]

You know Scott..YOU'RE AN IDIOT!!!!!!! First off I never once reading all of these post read anyone talking about the fee based being illegal. My clients know I get commissions. So F***KING what. They don't know what my commissions are and it's none of their business. But anyway let me get back to the legal issue. I'm in NC. If you charge a fee for bonds or anything over what the company charges we have to post it. Other wise it's illegal. Now, lets say like you, I charge a client $3,500 to find him the best coverage I have. First off, I'd feel bad about charging so much cuz it doesn't take THAT long to look for coverage. Hell, if it takes you more than a day to find coverage for your client you suck. If you know your clients like you should and you know their business like you should, it won't take long at all to find the best price and the best coverage. I'd rather make $5.00 off a sale and give GREAT coverage then make $5,000 and give them horrible coverage.
You need to keep your old tail in Maine, cuz we don't need your legal issue here in NC. You're a lawsuit waiting to happen.
We make 15 to 20 % off a sell. No matter what. Maybe you should take your fee crap to the companies. Cuz they are the one's that pay us. See how far it get's you. I don't know what kind of clients you have in Maine but I don't have those here.
Get a life, or better yet retire, and take your junk elsewhere.

[independent guy]

I think a component of all this is professionalism. I know the CPCU Society harps on the CPCU designation as some kind of indicator of professionalism [i.e. since we CPCU's have "ethics" and passed tests we must be professionals - just liker MD's and attorneys!]. But I think what the public views as "professional" is (1) a standardized course of higher education as a prerequisite to entrance in the field [lacking in insurance - I don't think anyone views CIC or CPCU courses/tests as an equivalent] and (2) compensation by client on a fee for service basis.

Actually, there are a few universities which will accept the CPCU designation towards either a bachelors or masters degree program. I am working on my CPCU designation right now, and am working towards my bachelor's in Business Administration through Walden University. The admissions advisor told me that they view the CPCU courses as graduate level courses, due to the scope, breadth, and difficulty of the testing.

http://www.aicpcu.org/Students/ace.htm

^ That webpage shows which schools accept IIA & CPCU designations towards college credits.

I can see why Scott wants to shy away from commissions... Because there are reasons to be selfish and put our (the agents) needs before the clients. If you are paid via commission, you are going to hesitate to find them a lower cost coverage if you think you can retain the business at the higher-cost level. By removing commission from the equation, Scott does not have that pressure.

[scott]

RE msidden -- Wow!

RE independant guy -- Good luck on CPCU - great program and well worth the effort. Many clients see those 4 letters as proof of your dedication to the business. After that go on to ARM. Tougher but well worth it.

To clarify a point. I don't sell insurance. I don't ever receive a commission. All my work is on a fee basis. What I personally do is no different that what the corporate risk manager at any Fortune 1000 company does - I do it for a fixed fee rather than a salary in smaller companies.

[Dope Smoking Agent]

Agents who can't sell insurance but have no other skills go on to become consultants or teachers. Enter Scott the ex-Farmers Agent now consultant. What is this world coming to?

As a broker I review my clients insurance needs and put them with the company that offers the best combination of price and coverage. There are times when I could put them with a company that might be higher in price than another company. However, you stand the chance of losing that customer if another competing broker offers that better priced company. That keeps the agent honest.