Our Agents Council for Technology LinkedIn presence features a discussion called, "The Other Shoe Falls...Overstock.com and Wal-Mart Announce New Insurance Initiatives." Click here to read.
For those of you who are interested in the issue of whether personal lines insurance, particularly auto insurance, is a "commodity" and how you can compete with insurers who market from this viewpoint with almost exclusively price-driven advertising, you might want to take some time to review the comments being made in this discussion and, perhaps, add your own.
With Walmart now making auto insurance available on the internet and in selected stores, expect competition to heat up. There are many aspects to the evolving insurance marketplace. The one I'm focusing on is trying to convince people (starting with our own industry, then the media, then consumers) that auto insurance is NOT a commodity and that the differences beyond price are material and critical.
If I think all canned green beans are the same, so I buy the cheapest variety only to discover that they're not nearly as good as the brand I've been buying, I'm out a buck. If I make the same mistake buying insurance, I could lose everything I own. And, if I hurt somebody else and have few assets of my own, the lack of insurance coverage can cost people I hurt thousands or millions of dollars.
We MUST make people understand that insurance policies are different, as are the claims practices and other services provided by insurers. Not only are there significant differences among the products being sold by insurers, but how they interpret the identical policy provision can result in polar opposite results. In addition, the counsel and advocacy that an experienced, well-educated agent can provide can have great value. These are messages that are not getting to the masses.
Here is some dialogue from a scene in the movie "The American President":
Lewis Rothschild: "They don't have a choice! Bob Rumson is the only one doing the talking! People want leadership, Mr. President, and in the absence of genuine leadership, they'll listen to anyone who steps up to the microphone. They want leadership. They're so thirsty for it they'll crawl through the desert toward a mirage, and when they discover there's no water, they'll drink the sand."
President Shepherd: "Lewis, we've had presidents who were beloved, who couldn't find a coherent sentence with two hands and a flashlight. People don't drink the sand because they're thirsty. They drink the sand because they don't know the difference."
The price-driven direct insurance sales organizations are the Bob Rumsons. They're the only ones talking. In the absence of leadership, direction and voice from independent agents, people WILL continue to drink the sand because they don't know the difference unless YOU tell them.
Click here for more information about "Is Insurance a Commodity?"
Enjoyed your article about "price." It's an issue that has frustrated agents for years. I taught an adult education class at a local university on basic personal insurance and I could see the various reactions as I asked questions and mentioned specific coverage situations. What I realized after the class was this: The problem Independent Agents have is they don't get the time needed to explain the details of why our system is the best and why coverage matters more than price. I had the luxury of about 10 hours. Most agents are lucky to get 10 minutes.
Basically, the cheapest price is the way to go, unless something happens. At that moment, when a claim occurs, people could care less about what they paid in premiums. They want to know if they are covered, as completely as possible. This situation is really evident in storm areas where someone might be calling around one week for the cheapest homeowners insurance they can find, then calling the next week from a concrete slab where their house once was, asking if they will be taken care of.
Below is a little story from my archives I thought you might enjoy.
St. Louis, MO
One night in ancient times, three horsemen were riding across a desert. As they crossed the dry bed of a river, out of the darkness a voice called, "Halt!"
They obeyed. The voice then told them to dismount, pick up a handful of pebbles, put the pebbles in their pocket and remount.
The voice then said, "You have done as I commanded. Tomorrow at sunup you will be both glad and sorry." Mystified, the horsemen rode on.
When the sun rose, they reached into their pockets and found that a miracle had happened. The pebbles had been transformed into diamonds, rubies, and other precious stones. They remembered the warning. They were both glad and sorry - glad they had taken some, and sorry they had not taken more.
And this is the story of Insurance.
Last Updated: June 2014