View this article online: https://www.insurancejournal.com/magazines/mag-features/2008/02/24/155757.htm
Like it or not, personal automobile insurance, along with personal computers, has evolved into a commodity product. According to Wikipedia, a commodity is defined as “a largely homogeneous product, traded solely on the basis of price.” As such, many insurance sellers offer apples-to-apples price comparisons when they compete for an auto policy.
Non-human Web sellers don’t need to justify this action, or rather, inaction. They simply quote what the applicant keys in. However, insurance offices manned by actual people cannot get by with this rationale. Some defend it by claiming that their buyers won’t sit still for an explanation of their options. So, they prepare a quote based on the current policy. Other agencies invest the time required to explain each prospect’s alternatives in detail.
Ideally, there is a way to help consumers to quickly identify the right policy for them without limiting their options. One such solution is to look at how personal computers are sold.
Consumer Choices
In the last century, personal computers required skilled salespeople. Geeky professionals, housed in independently-owned stores, routinely explained the differences between RAM and disk space and dot matrix and daisy wheel printers to unknowledgeable buyers.
Today, PC shoppers are expected to know exactly what they want on their own, with only online or marginal human assistance available. Yet, there are more choices than ever.
It’s the same with auto insurance. There are just enough policy limit and endorsement options to confuse some prospects, regardless of how capably a customer service representative (or Web site) tries to explain them.
Much like sellers of auto insurance, configure-to-order PC manufacturers like Apple, Dell and others have to deal with the issue of managing customer choice, since buyers can select from a seemingly endless variety of components. These manufacturers accomplish this by promoting a small selection of variations of the same basic computer. Customers then select one of these pre-designed configurations and buy it as is or request a processor, memory, disk, or other modification to meet their individual needs.
Agencies can follow a similar approach. Instead of presenting every auto prospect with every single insurance option there is (subject to any applicable regulatory restrictions and E&O guidelines), encourage them to select from one of three pre-defined auto policy packages to get the process started. They can then freely add or delete from the package, while still retaining its defining characteristic.
Pre-packaged Auto Insurance
Generally speaking, auto insurance buyers fit into three basic groups: People who want to spend as little as possible; those who desire better than average protection, and the average insurance buyer who falls somewhere in between. Accordingly, agencies could offer new prospects pre-packaged quotes in addition to, or in lieu of, the traditional apples-to-apples price comparisons. Here are some sample packages.
Basic protection. The lowest reasonable auto liability limits that your agency feels comfortable providing, plus any mandatory coverages such as UM and PIP.
Typical protection. The normal policy limits, endorsements, and physical damage deductibles carried by the average agency insured. This is the package that most prospects will select.
Superior. Higher physical damage deductibles, topped-off endorsements, and enough underlying liability to qualify for an umbrella policy.
By focusing on just three options, agencies can develop an informative set of explanatory sales brochures, quote sheets, online descriptions, and more. CSRs can then employ these agency-created resources to help consumers select the starting point that’s right for them. Prospects may add or subtract elements from the package they prefer. The advantage of this approach is that the buyer’s decision-making is minimized, without inhibiting his or her ability to make desired modifications.
Simplify and Sell
This approach reorganizes the auto policy’s variables into three easily digestible packages, which in turn, makes a consumer’s buying decision less demanding.
For instance, it’s far easier for someone to understand that the Basic coverage package might be inadequate for their needs when the average driver selects the Typical package and still others buy the Superior one. He quickly recognizes that the Basic selection represents more of a risk. A simple laundry list of split liability limits ranging from 25/50/25 to 250/500/250 doesn’t make this point as clearly. This trio of pre-selected starting points saves everyone time, without adversely impacting the consumer’s ultimate right to choose.
The approach works well for the computer industry, so why not for the monolithic auto policy? Besides, there are precedents. The original ISO business owners policy took a similar approach when it simplified what was otherwise a seemingly endless series of choices for selected commercial multi-peril classes. The same is true with the original homeowners policy when it combined residential fire and personal liability into a handful of pre-packaged options.
Isn’t it time to start selling auto in a similar fashion?