潘金莲传媒映画

Last year, I addressed the issue of insurance policy commoditization in the context of industry advertising in at least four of my monthly columns. Over the years, I’ve blogged about it several times. Recently, I’ve posted about it on my LinkedIn account.

My main point with all of these articles and social media posts is to point out that our incessant industry price-focused advertising leads consumers to believe that insurance, especially home and auto insurance, is a commodity differentiated only by price.

So, in the minds of most consumers and consumer media authors, as long as you’re comparing “apples to apples,” the only thing you need to know about insurance products are their prices. In other words, in the case of auto insurance, if you’re quoting the same limits and deductibles for coverages like liability, medical payments, UM/UIM, and physical damage, then all you need to make a purchasing decision is a list of insurers and their prices. In suggesting this, one state insurance department advised, “Yes, it’s just that simple.”

Astute industry practitioners know that this isn’t true. Pesky things like insuring agreements, exclusions, limitations, conditions and claims practices within these coverage categories prevent insurance policies from being identical or even comparable in some cases.

The problems is, within our own industry we have far too many “unastute” practitioners. I suspect that “unastute” isn’t a word but didn’t want to use the more inflammatory “ignorant.” How do I know this? One telling clue is the hundreds, perhaps thousands, of coverage questions I’ve received from people in the industry over the years that begin with something like, “Does ‘a’ homeowners policy cover,” or “Does ‘an’ auto policy cover,” or “Does ‘a’ CGL policy cover …?” As I so often say, “RTFP!”

How do we expect consumers to understand that there’s more to an insurance purchasing decision than price when our own advertising focuses almost exclusively on price and so many in our industry don’t understand the subtle, but often significant, differences between policies?

The only way I know I can personally do something about it is to continue to speak and write about this issue. And, hopefully, those that share my view will share what I write about. You can start by simply Googling “bill wilson insurance commodity” and you’ll find articles I’ve written here, on my blog, and elsewhere. I also invite you to follow me on Linkedin where I post almost daily at https://www.linkedin.com/in/bill-wilson-69937811.

If you would like to join me in the pulpit, one of the best ways to communicate with others is via storytelling. By “storytelling,” I’m not referring to fiction and fables, but rather illustrating important points with memorable and true examples. I’ll devote the remainder of this month’s column to a few “stories” and you can find more by searching online, as I described in the last paragraph.

Educate and Review

When my son moved into his first apartment, the management required renter’s insurance and could refer tenants to an affiliated entity that was selling a relatively inexpensive HO-4 product. When I examined that policy, I found that it was basic named perils, had minimal additional coverages, and included only a $50,000 liability limit. Clearly, the property manager doesn’t understand the significance to the property owner of renters with very low liability limits.

I found my son a much broader perils HO-4, with substantive additional coverages, and a $300,000 liability limit for only an additional $80 in premium. Even better, another HO-4 had open perils, higher limit additional coverages, and $500,000 in liability coverage for an additional $120, much better coverage for an extra $10 a month.

The moral of this story is that a little can buy a lot when you’re increasing coverage or limits. This is a true story and a factual statement. Share stories like this with your customers. Perhaps more important, first share stories like this with your staff.

I’ve written before about my friend, Missouri agent Tim Wahl, CIC, who sells on coverage, not price. Over the years, he has seen an almost weekly parade of contractors and other business owners who come into his office in the hopes of “saving money.” When Tim gets through showing them the holes in their current insurance programs and explaining how he can fix these gaps inexpensively while significantly improving his coverage, they often leave his office paying a higher premium than when they came in.

It often just takes educating the policyholder or prospect on how they can get a lot for a little by shopping coverage and not price. Everyone prefers to buy on value. Everyone wants a bargain. Otherwise, we’d all be driving used Yugos. The key to improving sales begins with educating yourself, then your customers.

Start by reviewing the carriers and products you sell. To illustrate, about this time last year, my friend Tim sent me an email telling me that the agency was dropping a personal lines carrier, one that was quoting home and auto at least 20% lower than every other carrier in the agency. He included a detailed breakdown of his coverage analysis for their home and auto forms.

For example, the auto form did not cover acquired autos unless the carrier insured ALL autos owned by the insured.

None of the agency’s other auto insurers had such a restriction. Even worse, as we both understood the policy, there was no coverage for business use of an auto that involved transporting persons or property. In one case I recalled, an insurance agent, under his own auto policy with this type of exclusion, had an auto collision claim denied that occurred while he was “delivering” a policy to a customer.

The subject insurer’s homeowners policies excluded any loss if any insured failed to take “ALL reasonable” steps to save and preserve property from a covered cause of loss. What is “reasonable”?

Also excluded was “ANY substantial” change or increase in hazard within the control or knowledge of an insured. Would that include storing a two-gallon can of gasoline in the garage for the riding mower? What constitutes “substantial”?

Why was the agency dropping this insurer? Because these aren’t products a consumer should buy when there are far superior forms available for a little more in cost.

The insurer’s website says they deliver quality coverage at an affordable price. Talk is cheap. So are some insurance products. Stop talking cheap and start telling stories that focus on value and encourage and enable wise purchasing decisions.

OK, stepping down off the soap box. At least until next month.