Author: Howard Candage
What should Independent Agents do when faced with personal lines commission reductions? My answer: Fight for your position in distribution and add the value you should be adding, even in the face of fear. We have fear, as agents, to push back against our insurers.
If we truly look at the logic, cutting personal lines commissions is depriving the people who need the agent's advice the most from the availability of that advice. These clients are being looked down upon by commission compensation as they do not develop an adequate individual premium to pay agents a reasonable amount of commission to properly do the job of giving advice. Commission compensation ONLY rewards the amount of premium dollars generated. Thus, the system leaves the personal lines client behind. We should not let this happen.
Why consumers need advice:
- Clients do not understand the scope of coverage available, of the value of that coverage.
- Clients are in denial of the fact they MAY have a claim.
- Pre loss and post thinking are not focused upon by clients.
- Unequal values are exchanged by the parties to the contract.
- The purchase of insurance is likely compelled by a third party which creates resentment and resistance to the necessary focus to protect themselves.
- Clients are held hostage by the insurer post loss.
Clients do not understand the scope of coverage available, or the value of that coverage.
Insurance policies are very difficult to read and understand. As an expert I have shared the room with groups of attorneys and the entire group of us have a difficult time understanding what the policy really says. The client needs an advocate PRE loss and POST loss to assure appropriate choices are made and that those choices are made with FULL knowledge that of the trade-offs and impacts.
Clients are in denial of the fact they MAY have a claim.
Clients are absolutely SURE the events covered by the policy are not going to happen TO THEM! They are not going to take adequate time or invest appropriately to assure the best possible outcomes.
Pre-loss and post-thinking are not focused upon by clients.
I have a very broad education in insurance and risk management. In all of my studies I have never encountered ANY education about the insurance agent's role post claim. The insurance adjuster is charged with closing the claim. He or she has a full plate of different claim to handle. It is not the adjuster's role to hold the client's hand. It is the agent's job to hold the client's hand. If they both do their job properly, the client should be able to feel good about the insurer's role in indemnifying them.
As a secondary problem, the agents are not expecting a claim and the agent is at some level in the same state of denial as the client. This "it won't happen to them" thinking is inappropriate and must be stopped.
Unequal values are exchanged by the parties to the contract.
The insurance purchase is different than most other purchases. Let's say I offer (contractor Howard) to build you a 3,000 sq. ft. home in Silver Springs, MD (just to select a known location) and I offer to build it for $99,000. What are you going to say? "Where do I sign?" will be your response. Why? Because it is obvious I cannot build that size house for that money! Why is it obvious? Because equity somewhere near denotes parity. You, or anyone with a basic amount of knowledge can tell that my offer is not enough money to build this house.
In an insurance contract there is no logical relationship between the total premium paid and the outcome necessary to indemnify the client. Without a logical relationship, this invites the insured to make a totally ignorant purchase mistake and not even know it until after the claim! It takes a person trained in insurance to make this determination of equity as it is not in parity.
The purchase of insurance is likely compelled by a third party which creates resentment and resistance to the necessary focus to protect themselves.
Because of this resentment and resistance, clients will continue to brush off the responsibilities of a purchaser until after the claim. The agent has to push the insured to make good choices, both for the interest of the client and for the interest of the insurer.
Clients are held hostage by the insurer post loss.
Finally, when a trigger event occurs, it is too late to change anything. At that point, the client is held hostage to the insurance contract that was issued and to any bad choices that happen to impact the current claim. If you find yourself here, it just stinks to be you. There is no post loss reformation available.
In summary: Agents must do a better job making sure your insurers understand your value and to advocate for the interest of your client. Realize you add great value to the insurance transaction and advocate for an improved compensation model for agents that fairly compensates the agent's contribution to the process. Finally, add all the value you can to the execution of the promise granted by a policy of insurance.
Howard E. Candage, CPCU, CIC, CRM
(207) 671-7066
Howard@hecandage.com
First published: December 21, 2016