Let’s face it, insurance is a commodity. The insurance consumer will not see any significant value difference between insurance companies and insurance agencies. Products, price and service are roughly the same.
Consumers have new options to access insurance through, as insurtech and fintech (technology-related companies) drive channel distribution into new, non-traditional companies. Direct writers rely heavily on clever marketing to promote their brand presence. Local, independent agencies no longer have a captive audience.
To differentiate from others, salespeople are forced to sell on rapport, relationships and sales skills. Hackneyed pitches such as, “we have the best service” or “this policy has broader coverage” get bandied about. Price sensitivity is often handled by adjusting or justifying limits and deductibles.
How to Differentiate
How can the insurance industry in general, and a local insurance agency specifically, standout and be perceived as offering an excellent quality service to the consumer? The answer is to provide the client with additional services and products that they cannot get from the rest of the insurance industry or other agencies in town: Services and products that the consumer needs and desires, or new ones that they don’t yet know that they “need.”
These additional services are called “value-added services” and as the name describes, are valuable to the client. Value-added services (referred to as “VAS” in this article) are add-ons to the core services of a business. They have unique characteristics and provide benefits to the client that core services cannot. VAS can be stand-alone products, although they are usually connected to the core service and intended to enhance them.
Increasing customer expectations are the initial driver in the offering and creation of VAS. The major players in the insurance industry react to meet these consumer demands. Insurtech and fintech companies develop new and innovative VAS, which creates new services that the customer did not have before. But what can the local, independent agency do?
Anticipate and Collaborate
Incorporating VAS into an agency will require a re-think on the core beliefs and behaviors of an agency. It requires understanding the current client’s needs and then filling in those gaps. It is equally important to anticipate future needs and develop or seek out VAS that will be attractive to the customer. VAS should be looked at as a way to collaborate and engage the customer. This with strengthen existing relationships, improve retention and foster new client acquisitions.
VAS can be anything that insurance customers might want or need. There are two ways to categorize VAS. First, VAS can be in the form of advice and assistance. These VAS typically provide information to prevent or mitigate risk, as well as let the customer better manage their property and lifestyle. Some ideas include 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.
Second, VAS can be a self-service tool, where the client has the tools to better manage the account and the insured risk on their own time. Consumers like the immediate access, and the agency usually has less service work to perform. Self-service tools are generally in collaboration with the insurance company or some other third party. Some carriers allow customers to have limited but direct access to their account online. Third-party vendors have created client portals that enable customers to access information and make limited changes to their accounts. These include CSR24, Zywave, CertificatesNow, etc.
There needs to be a realistic assessment on what can be offered by the agency based on staff, time and money limitations. Otherwise, these services are often outsourced for a fee. A smaller agency in a rural area might not be able to provide the same exotic services a larger agency or regional broker offers to its high-end clients. However, that same small agency can put together an impressive package of VAS 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 who can research, analyze and create a series of VAS for the agency. In a small- to medium-sized agency, the owners with administrative staff will have to do this and decide what can be offered cost-effectively for the firm and its clients. Some agencies provide these services for only accounts over a specific size. Some agencies will pay for these services for their clients, and some charge the client for the use of these services.
There are some very simple VAS that can be done quickly with minimal cost. One client had these two thoughts: 1) Send out an email to clients with a checklist for disaster preparation, especially just before a pending event such as a tornado or hurricane. 2) Videotape or photograph a client’s possessions (personal and business) for claims purposes on a bi-annual basis, and store the videos at the agency. Some agencies are also offering drone service to look over prospect’s properties for hazards an underwriter may be skeptical about, especially with all of the wildfires in certain areas.
Education is an easy VAS. Some agencies offer public workshops on insurance-related topics. Training can be customized for a specific client as well, such as risk management, loss control, employee benefits compliance, etc. There are a plethora of sources to create an educational VAS. Internal risk management services and products can be developed from sources, such as IRMI and RIMS. Advisen (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 peers through the use of industry-specific benchmarking. Or, periodically send clients important industry news related to insurance. How about being able to compare policy coverage forms between companies in proposals?
There are shortcuts that can be used in place of creating customized VAS. Research what VAS insurance companies might offer. Many companies will put together a package of VAS for their key agents and VIP policyholders. For example, some companies offer VAS for high-end personal lines clients, such as appraisal services, home monitoring, identity fraud mitigation, background checks on domestic employees. Chubb’s private fire prevention services recently made the news during the California wildfires. Health insurers offer telemedicine, health screening and education on preventive health care. Life companies offer estate planning and retirement planning services.
Work with other local professionals to develop VAS packages to offer clients. Coordinate with local CPAs, attorneys and payroll service-providers to offer their services at a discount to clients. Hire a consultant that can develop a business disaster plan and sell that service to clients.
Some companies pre-package a set of VAS that the typical insurance customer might desire. One such company is BizAssure (bizassure.com). Members can offer to their clients legal, HR, claims and accounting services. They can pay the BizAssure fee themselves or charge the clients that need and use the services available. This type of arrangement can put the small agency ahead of its larger competitors in the eyes of the consumer. These organizations charge a membership fee for the offerings.
Free or Fee
Because these are add-ons to primary insurance services offered for a commission, they should meet the definition of what agencies can charge a fee for by law. Therefore, VAS can be sold to the client for a price as long as they are separately disclosed on the client invoice. Don’t be surprised when they don’t blink at paying a fee for the VAS. Clients will love the ease of getting great additional services and products provided by their broker/agent.
VAS are increasingly important to the insurance industry. Keep in mind there are at least three benefits to the agency. First, the client will become more of an advocate of the agency and less likely to move to another agent/broker. Second, agencies that have VAS will have a market advantage and attract new clients. Finally, if the agency offers these additional services and products for a fee, the agency will bring in a new income stream.
Start small and methodically add services and products. Keep the main focus on insurance products. Add value to that service before adding VAS. Don’t get bogged down handling the details of the value-added services — they should be mostly outsourced. This approach often does not require a significant commitment from the agency.
The “Minding Your Business” column is a regular feature of Insurance Journal Magazine. This column was published in the May 20, 2019 issue.
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