Creating a Real Value Proposition

By C.R. Ekern | July 18, 2011

The Myth of Value Added Services

These are very interesting times for agents and brokers. It has not been since World War II that our industry has been in these depths – a shrinking premium base. This coupled with a sluggish economy and falling insurance rates have created a unique business environment that is ravaging many producers and their firms.

It was Robert Frost who once said: “The best way out is always through.” The question is … how?

The only way out is to establish a value proposition that differentiates your firm from others. You have been hearing that for years from so called experts. But, when you ask the question of how, you usually hear a litany of features described as “Value Added Services.”

Let me give you a little tip on the subject of adding value. There is no such thing. It is impossible to add value. You can however use your value proposition to reduce costs and impact a client’s financial statement. If you have one and can quantify it.

‘If you cannot embed your cost savings inside a client’s financial statement, you are only selling a list of features.’

So why do so many agents and brokers blindly repeat the buzzwords of “adding value.” Simply put, because they do not know how to reduce a clients costs and quantify their impact. So they revert to a script about adding value as a list of features. “We provide risk control, claims management, and other value added services,” they parrot in unison. And then they wonder why the prospects or clients ask the next question, “What is your price?”

It is time for this industry to wake up to the truth that the top performing agents and brokers have known for years. Are you ready for your wake-up call? Here it comes. If you cannot embed your cost savings inside a client’s financial statement, you are only selling a list of features. The financial impact to your clients and prospects are the benefit. You had better know it and how it impacts your prospects’ financial condition … or else.

Total Cost of Risk

The concept of Total Cost of Risk (TCOR) is not an experiment, it is real. As a former highly successful mega broker, I can tell you this: It is the only way to truly embed the benefits of your organization inside a client’s financial outcome.

TCOR was invented in the 1970s by risk managers.The concept of TCOR allowed risk managers to demonstrate the impact of their efforts in business discussions with upper management. Each year, their bosses would ask them to justify their budget and expenses. Total Cost of Risk became the vehicle that allowed them to quantify their impact inside the business. Therefore, rather than being an expense, they became a return on investment.

Total Cost of Risk is not a sales technique, it is a consulting tool. If you intend to be in this game for a number of years, you better get on board quick. Those firms that are mastering TCOR are gaining market share and actually growing commercial revenues.

But, you must beware; there are a lot of sheep in wolves clothing that believe creating a TCOR Value Proposition is about providing “Value Based Services” rather than reducing client costs.

Interested in learning more? Don’t miss the next article in an upcoming issue of Insurance Journal titled: “Total Cost of Risk.”

About C.R. Ekern

Ekern is president of C. R. Ekern & Co. and author of a newly released whitepaper titled, "Total Cost of Risk: Building a Value Proposition." E-mail: Web site:

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Insurance Journal West July 18, 2011
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