Most consumers buy on price and not value. True or False?
The vast majority of insurance salespeople would tend to believe there is a lot of truth in the above statement–despite any well-programmed responses from sales training that might exist.
Most producers labor under the condition of selling roughly the same product as their competitor. The competitive edge used by these producers is that their firm “has the best service,” “this policy has broader coverage” or some similar generalization. Price is handled by adjusting or justifying limits and deductibles.
Look outside of insurance. If a person wants basic transportation, there are dozens of cars that meet that criterion. For the most part, the cost is within a close bandwidth. Therefore, it makes sense for the auto consumer to look around for the best deal in basic transportation.
However, many people buy luxury cars. Those people will weigh the whistles and bells–added value–with the additional costs involved. Dollars don’t seem to matter when it comes to prestige or perceived quality–as long as it is unique. However, if the buyer sees no discernable difference between products, price will be one of the major deciding factors.
The fact is, within a few broad categories, most independent agencies are roughly the same. Sorry to hurt everyone’s feelings. The majority of firms that specialize in personal lines are run in a similar fashion. Likewise, most firms that specialize in commercial lines or employee benefits are similar to their peers.
For most firms, the insurance consumer will not see any major value difference between agencies. Because products, price and service are roughly the same, salespeople are forced to sell on rapport, relationships and sales skills.
Be bold, be unique
What can an agency do to make it stand out from the crowd? How can an insurance agency be perceived as unique and of good quality to the consumer? The answer is to offer the client additional services and products they cannot get from other agencies.
What type of services can and should be added? What are “value added services” anyway? Read on for answers to these questions.
Value-added services (VAS) are add-ons to the core services of a business. They have unique characteristics, and they relate somehow to the core services and the other services offered in a firm. VAS also provides benefits to the client that core services cannot.
All VAS share the same characteristics. They do not form a basic service from the firm, but rather they add value to the total service offerings of the agency. In concept, VAS can be stand-alone products, although in practice it might be unlikely. VAS do not counteract the basic services offered, but rather augment them. And because they are add-ons to basic service, they may be sold at a premium price.
Value added service can be anything that insurance customers might want or need. Think of risk management services, human resources services, attorney services, financial management services, estate planning, business consulting, disaster planning, identity theft protection, COBRA administration, loss control, workers’ compensation claims management, security protection, etc.
One step back
Before embarking on adding non-insurance services and products, it is advisable to make sure the insurance side is in order. There needs to be value with the existing insurance products and services. Make sure the clients have the proper coverages, limits and endorsements.
Agencies should consider offering multi-lines or associate with other insurance specialists that offer the other lines of insurance. Many insurance customers will prefer one-stop shopping for their insurance needs. Again, provide quality and value to the insurance sector first. Also, this way, competitors that sell multi-lines will not have strong leverage against monoline agencies.
What to do
Incorporating VAS into an agency will require a re-think on the core beliefs and behaviors of an agency. It requires understanding the clients. It is important to evaluate what value added services and products the client might need and will want. There needs to be a pragmatic assessment on what can be offered by the agency based on staff, time and money limitations.
A small personal lines agency in a rural area might not be able to offer the same exotic services a large public broker offers to its high-end clients. However, that same small agency can put together an impressive package of value added services and products that will differentiate it from its competitors.
Putting together a customized package of VAS can be rewarding and can be incredibly time consuming if it becomes too elaborate. If the agency is large, it might make sense to have a full time employee research, analyze and create a series of value added services for the agency.
Keep it simple
However, there are some very simple VAS that can be done quickly with very little cost. Mike McGee of Investment Insurance Consultants in Katy, Texas, had these two thoughts: 1) Send out an e-mail to clients with a checklist for disaster preparation, especially just before a pending event such as a hurricane. 2) Videotape or photograph a client’s possessions for claims purposes on a bi-annual basis and store the videos.
For more sophisticated VAS, internal risk management services and products can be developed. Local attorneys, CPAs and HR consultants can be tapped to offer package deals to clients. Third-party administrators can be hired for claims management, COBRA administration and other services.
There are short cuts that can be used in lieu of creating customized VAS. Research what VAS the insurance companies might offer. Many companies will put together a package of VAS for their key agents and VIP policyholders.
For example, some companies such as AIG, Fireman’s Fund and Chubb offer VAS for their high-end personal lines clients.
There is a plethora of VAS that can be offered to commercial lines clients. Hook up with a bookkeeping payroll service and offer it at a discount to clients. Hire a consultant that can develop a business disaster plan and sell that service to clients.
Put a risk manager’s hat on and think of what services a client might use. How about loss control training? Some agencies have a library of videotapes on various loss control issues that they loan out to clients. Help create a safety program for clients.
Employee benefits companies might offer training or support for compliance to regulations such as HIPAA and COBRA. Some agencies offer online administration and enrollment for their benefit clients.
There are some companies that pre-package a set of value added services that the typical insurance customer might desire. One company is BizAssure (www.bizassure.com). Members can offer their clients legal, HR and accounting services. This type of arrangement can put the small agency ahead of its larger competitors in the eyes of the consumer.
Another company called Advisen (www.advisen.com) provides its members with a variety of resources related to insurance products and industry-specific news and data. Imagine being able to show clients how their insurance portfolio compares to their peers’ through the use of industry-specific benchmarking. Or, periodically send clients key industry-specific news related to insurance. How about being able to compare policy coverage forms between companies in proposals?
For the most part, these are not services given to clients–they are services the client pays for. Clients will love the ease of getting great additional services and products provided by their broker/agent.
Keep in mind there are two benefits to the agency. First, by offering these additional services and products, the agency will bring in a new income stream. Second, the client will become more of an advocate of the agency and will be less likely to move to another agent/broker.
Start small and methodically add services and products. Keep the main focus on the insurance products. Add value to that service before you add value-added services. Don’t get bogged down handling the details of the VAS–they should be mostly outsourced. This approach does not require a big commitment by the agency.
Firms that offer value added services will stand out from the pack. Producers in these firms can say–and prove–they have the best service in town.
Bill Schoeffler and Catherine Oak are partners at Oak & Associates. The firm specializes in financial and management consulting for independent insurance agents and brokers. They can be reached at (707) 935-6565, by e-mail at:
firstname.lastname@example.org, or visit:www.oakandassociates.com.
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