I read a great article in an industry publication recently, outlining how insurers are seeking new product lines to offset the soft market. The article noted how carriers were exploring insurance products for lost profits resulting from reputational damage, supplier failure and political and regulatory changes. This approach is so simple and yet so rare in our insurance world. I absolutely rejoiced when reading this article.

Some of the greatest exposures businesses have today are not being readily insured. Reputational risk, for example, is a huge exposure for every business, large or small. Consider T.J.Maxx. Their reputation did not suffer because their profits were poor, or their goods were shoddy or customer service was lacking (and I'm not implying any of these issues existed). Their reputation suffered because some hacker accessed their customer database. Similarly, CBS lost reputation when Janet Jackson lost her top. Reputational risk is a huge exposure.
So are regulatory changes. Think of all the bars and restaurants that lost revenue because smoking was banned. These businesses did nothing wrong, yet still lost a lot of money. Quite simply, the insurance they have is, at best, a partial solution to their needs.
When you take an objective view of a typical insurance policy, seldom is the coverage so comprehensive that the insured is truly made as whole as before the loss–which, if I recall from Insurance 101, is a primary goal of insurance. Time spent on a typical workers' comp claim and the costs of hiring and training new people are just two easy examples of losses often incurred but not reimbursed by insurance. This means a lot of untapped opportunity still exists for expanding insurance coverages.
Why, then, do so many agencies continue to provide only partial answers? Simply selling more policies is a loser's game, especially in this soft market. The winners are selling solutions, and some of these solutions exceed traditional insurance. The new coverages detailed in the article I read are a wonderful step in the right direction.
But without even considering these less traditional coverages, one simple solution is offering clients appropriate coverages that are already readily available. In this soft market, when so many agents are merely trying to match the same coverages at lower prices, nothing is accomplished other than providing clients with equally inadequate coverage for slightly less money. Is that what an insurance agent is supposed to do? That's a loser's game, too.
Perhaps the blanket term “inadequate coverage” sounds a little bold, but after doing a hundred formal and informal E&O reviews, I can confidently say the vast majority of insureds do not have the coverage they need. Whether the inadequate coverage is due to the customer's choice or the agent's carelessness is irrelevant. The point is that the customer has inadequate coverage, and you need to do something about that.
And here's what: With rates falling so fast, now is a great time to offer insureds all the coverage they need. Savings achieved by the falling rates can be used to purchase better coverage. Clients can purchase higher limits and/or additional coverages and still decrease their insurance expense.
This is a huge winning formula. It only works, however, if the producer offers the coverages the client truly needs rather than just matching the existing declarations page. If that's all the producer is doing, the agency owner might as well outsource the job to India, because they can do the same thing for a quarter of the price.
Many agents have found this approach to be much more successful than cross-selling, because when many producers and CSRs cross-sell, they only sell the client another inadequate policy. Providing one policy with complete coverage is a much better solution than providing two inadequate policies. Finding the additional markets might take some work, but isn't this what independent agents are for?
Many producers may also need to learn their coverages better. Lack of knowledge limits their ability to write policies correctly. While I agree producers should not sell coverages they don't understand, isn't it a better idea to simply learn them or refer the client to someone who has? If you go to the doctor for a heart problem and he has little training in cardiology, would you prefer he simply ignore your illness and send you home? Why would a producer not refer the client to a more knowledgeable agent or learn the coverage himself, instead of turning away business? If “greed,” “time” or “pride” is your answer, be sure to disclose to your clients that you're not quite willing to provide them with the best possible coverages.
Benefits producers have already learned these lessons. Every agency has the same four or five benefits carriers and exactly the same rates, so they have to offer something other than basic coverages if they're to succeed. As a result, their clients are gaining great benefits far beyond an insurance policy, including better health for their employees. Such a solution benefits everyone.
The same opportunities are available for P&C producers. Those who adapt now to providing their clients with full insurance solutions will have far more success, and sooner, than those who adapt only when necessity demands.
The keys are:
1) Producers must know their products and be willing to research or refer when applicable.
2) The agency must think beyond standard insurance policies.
3) The agency must emphasize selling all the correct and applicable coverages.
When an agent doesn't know the answer to a client's question, “I don't know” is the honest answer, but it's not the best answer. The best answer is “I don't know, but I'll find out.” Develop that habit, and you'll be on the road to expanding your product lines and letting the soft market take care of itself.
Chris Burand is president of Burand & Associates LLC, an agency consulting firm. Readers may contact Chris at 719-485-3868 or by e-mail at [email protected].