Luckily this producer's agency also believes in partnering with its clients by providing access to resources that can better manage their risks and costs. His presentation outlined new methods to improve return-to-work times, increase safety awareness, better manage claims, implement a wellness program and conduct seminars to better educate the management of the city.

At his turn to pitch the council, he quickly reviewed the coverages being quoted, then showed the potential savings that the value resources could bring to the table. As he showed the premium, he put it in terms they could understand and appreciate: His quote would provide the savings to pay for the truck.

Sounds simple, doesn't it? Yet all too many producers speak in insurance terms and line-item quotations, usually based on an analysis of the existing policies' coverages, limits and gaps. That may work for some CFOs, but most insurance buyers have little or no understanding of what's really being said. Plus they are viewing the quotation as a strict line-item expense, seldom if ever viewing it as a savings or a potential return on investment.

That's why the industry is self-commoditizing We create price buyers rather than nurturing value partners.

Understanding the Process

Speaking the language of value has several key components:

1.Position everything in the language of your prospect/client

Nobody really gets excited about insurance, so it's not surprising that most business owners and managers don't spend much time studying the issue and its language. Yet most insurance producers spout terms like “ex-mod,” “caps,” “gaps,” “P/C,” etc. Their prospects nod their heads but seldom grasp the meaning of what's being said.

Top performing producers know the prospect's industry and speak in those terms rather than insurance. Prospects understand that and appreciate it, giving that producer the edge over the competition. After all, if you're going to partner with someone, you really need to know their industry.

2. Research the prospect

Due diligence for a producer is more than analyzing past coverages for an apples-to-apples comparison quotation. Top performers spend time reviewing risks, assessing management policies and learning what the concerns of the prospect truly are in relation to their business, not their insurance.

This enables the producer to uncover needs that can be addressed with value. That's why the aforementioned producer related savings to a new truck rather than fighting it out with the competitors on line-by-line price comparisons.

Related: Read Jack Burke's column “Chicken and the Egg.”

3. Quantify the value

We have heard about TCOR (total cost of risk), but we seldom align it with TVOQ (total value of quotation). For instance, TCOR points out the true costs of an injured worker, costs that are well beyond the medical expenses. If the prospect understands the basis of direct and indirect costs, that is an effective way to present a quotation. However, when value resources are brought into play, their value and potential returns can be coupled with the TCOR figures for a truly eye-opening presentation that will send the competition scurrying away with their tails between their legs.

The Process of Quantification

An article from AA&B's November issue (“Chicken and the Egg”) showed a chart from an agency detailing improvements in workers' comp claims over a 5-year period. One county decreased claims from $573,830 during the 2005-06 fiscal year to $12,817 in 2010-11. Dramatic presentation, right?

Unfortunately, that was only a small part of the puzzle when it comes to quantifying value. Showing more than $560,000 in claims reductions is great, but what if that chart was expanded to:

1. Add the indirect costs related to those claims that are not covered by insurance. Conservative estimates place average indirect costs as four times the direct costs. Now you're adding $2.24 million to the $560,000. But don't stop there: Run rate comparisons based on the experience mods of 2005-06 versus 2010-11. Add up those differences in premium reduction and add that to the total. By taking time to estimate the differences in total, you're presenting nearly $3 million in savings.
2. Include all of the value resources that were brought into play to assist in the management and process improvement responsible for the decreases in claims. Add in the value of those resources and you're well over $3 million.

When presenting against potential competition, the producer doesn't need to worry about premiums that might be a bit higher. A $15,000 variance is easily offset and justified with more than $3 million in savings brought to the table by that producer's agency through their ongoing partnership.

Peddler or Partner?

When properly implemented, the strategies of language, value resources and quantification will position you effectively in the very competitive world of insurance. Because you are walking the walk rather than talking the talk, it isn't even necessary to say “…and we provide good service.” You've proven it without having to say it.

Related: Read the column “Balance Sales and Retention” by Jack Burke.

Peddlers sell insurance in an increasingly commoditized world. Partners present value that offsets price. Which are you?

Next month we'll be going into more detail on the language of value, but in the interim it might be interesting to conduct an internal audit. Do you speak the language of your clients and prospects? Do you bring value resources to the table? Is the value you present quantifiable?