What do you do when a buyer says “It's all about price this year”? Prospects and clients don't want to pay too much for insurance. Neither do you. This is true whether the market is hard, soft, or anywhere in between.

Yet when the insurance market is soft and economic times are hard, independent insurance agents face intense, price-driven sales pressure. Plunging employee payrolls, reduced business revenues and shrinking property values by themselves decrease premiums. So do buyers who increase deductibles, lower limits, eliminate coverage or, worst of all, go out of business. Those customers remaining fight for survival and shop their insurance plans ruthlessly.

Soft market, tough economic times, reduced rating basis, fewer clients and cut-throat competition create a perfect storm of plummeting insurance commissions. What's an insurance professional to do when buyers insist on cheap insurance as well? The answer: Provide the best value for every insurance dollar invested in protection.

Related: Read Ed Lamont's article “Use 'CPR' on prospect objections”.

How do you do that? First, know the advantages and solutions you offer. Clearly identify your coverage, service, risk management and relationship advantages. Be aware of the problems you, your agency or your insurance companies solve for clients. To know the value you provide is the foundation for handling price objections.

Knowing your betterments is one thing; believing that your advantages and solutions provide excellent value to buyers is another thing altogether. If you don't believe you deliver better coverage, superior service or relevant risk management options, then why should your customers believe it?

Finally, how do you communicate value? What can you say to get across your betterments, advantages and solutions? How do you help insurance consumers understand that the problems you solve or advantages you offer reduce expenses, increase profits, or save time?

Determine the true cost of insurance

When customers emphasize the cost of insurance as the most important reason for doing business, do they mean it? Many do. Insurance premium is easy to compare when agents compete. Premium is equally obvious when seen on a bill or entered on an income and expense statement. If your customer anticipates having no claims or service issues during the policy year, then it makes sense that premium be the basis to determine value, right?

But that's a huge assumption, isn't it? Protection packages built to reduce premium often cost buyers dearly when claims occur. Dollars paid out because of higher deductibles, exhausted coverage limits or unanticipated retention have to be added to insurance premiums to determine the true cost of insurance. Time is money, too. When service issues burden business owners and their staffs, revenue- producing activities stall and opportunities are missed.

So what is the cost of insurance to a buyer? Too often it's nothing more than premium dollars; the price of protection charged by an insurance company and quoted by you. To help insurance consumers truly understand cost of insurance, think of it as an iceberg. Premium is merely the tip of that iceberg, the part everyone sees because it's above the waterline. Deductible cost is unseen. Unplanned retention is hidden below the waterline. So are lost opportunity costs and “time is money” impact due to service issues. Like an iceberg, what's below the waterline is more dangerous than what is above. The Titanic didn't sink because it hit the tip of the iceberg, did it?

Related: Read the article “Sitting on a 'goal mind'” by Tom Barrett.

When negotiating, buyers may insist that premium (the tip of the iceberg) is most important. Professional insurance agents and risk managers know better. Can you think of even one company that went out of business because it paid too much insurance premium? Probably not. It's what's below the waterline that has the potential to devastate ongoing operations financially, or worse, sink a business all together. But here's the key: If you don't believe it, how will you ever communicate this critical risk management concept to a buyer?

Communicate value

If you know the advantages you, your agency and your insurance companies provide, how can you communicate that value to prospects and customers? What do you say when a buyer focuses on price? More importantly, how do you say it?

The best way to communicate value is to listen, probe and then tie your advantages and solutions to your buyer's interests. Lecturing a buyer on the benefits of your betterments is “selling by telling.” Instead, skillfully lead customers with questions that reveal the value you provide. To do this, you must know and believe your coverage, service, risk management and relationship advantages thoroughly.

Before you try to handle any price objection, verify understanding. Don't launch into an explanation without first confirming what your buyer means. You may be wrong.

Could “it's all about price” indicate service dissatisfaction? How could a price objection be related to service? Perhaps promises made weren't kept. Maybe a problem was poorly handled or worse, wasn't resolved at all. Consider this: Could a client have no problems for you to fix, no material service issues to be handled, but also have paid its bills on time? Sounds like an ideal client, doesn't it? Be careful. It's exactly the type of client who could wonder, “Why am I paying so much insurance premium and receiving so little attention?” Poorly handled service issues or absence of service altogether are legitimate reasons for telling you, “It's all about price this year.”

“It's all about price” also could be coverage related. A protection plan with high deductibles or loss-sensitive features might have resulted in additional out-of-pocket expense to be borne by your buyer. So could denied claims. Customers who add the cost of deductibles, loss-sensitive plan payment adjustments or unpaid claims have valid coverage reasons to say, “It's all about price this year.”

Finally, “It's all about price” could legitimately mean exactly that. The stresses on business owners due to cut-throat competition and the economic slowdown may have forced your buyers into survival mode. By necessity, they need to ruthlessly examine all operating expenses, including insurance premium. You simply don't know until you confirm what a prospect or client means when they tell you, “It's all about price this year.”

Take it to the street

When you set negotiation rules or attempt to handle price objections, always confirm understanding first. Determine if the message you hear means what the buyer is saying. Probe. Get specifics. Determine acceptable conditions to meet. Ask questions to see if your advantages, solutions and the value you deliver are clear to your customer. Remember to ask “below the waterline” questions. When done skillfully, questions are the best way to communicate value.

Related: Read Laura Mazzuca Toops' article “Retention versus new business acquisition: What works?”.

Build a success log documenting occasions when a coverage, service or risk management advantage helped a customer save time or reduce expenses. Successes validate value. Create a solutions log to track the times you've solved problems for buyers. Solutions anchor belief. Solving a prospect's problem is an excellent way to earn a new client. Solving a client's problem is the surest way to retain her trust and keep her business year after year.

Buyers purchase value. Cost is how insurance consumers measure the value when weighed against the coverage, service, risk management and relationship benefits you provide. To know, believe and communicate your advantages and solutions allows you to sell value, not price.

Don't succumb to a low bid mentality. It's a trap. If your buyer doesn't ensnare you, don't set the trap on yourself by selling price instead of value. Separate yourself from your competition. Solve problems. Prove value. That way, “It's not all about price this year.”