I don’t think we look alike…

I was at an industry conference last week and sat near two gentlemen who owned firms that were similar enough to mine that most consumers would think of us as competitors.  These two men were obviously intelligent and experienced, and they both seemed like genuinely nice and caring guys.

The subject of their conversation was how one of the men built an extremely successful business on the defined strategy of keeping expenses as low as possible by negotiating access to a bank’s list of customers and then selling and delivering insurance to those customers without ever having to give advice or help them in the process.  As this man put it, “When someone takes out a loan, all they want is for the insurance problem to evaporate so they can close on the deal.”

So there you go.  My own industry is the #1 contributor to the dumbing-down of the value and expectations placed on insurance by consumers.  It’s why some insurance companies advertise using cartoons and not a single comment about whether their product is any good.  It’s why consumers ask for discounts and not about whether they’ll actually have enough coverage to rebuild their home.  It’s why insurance companies can get away with poorer and poorer claim service because you know in advance it’s going to suck, so why try?

I don’t begrudge someone’s prerogative of choosing how to run their business, but I don’t believe it’s matched with enough education to the consumer so that they know what they’re getting into.  Insurance is complicated (have you ever actually read a policy?) and the consequences of believing you’ve done it right when you really haven’t can be severe.  That’s why we believe in teaching and evangelizing, in investing in our own expertise, and in actually being present & side-by-side with our clients.  We think it’s better for most families and we’ll continue to commit to that way of doing things.

Photo: Palm Beach, FL

The 4 Degrees Of The Right Answer

Whether reviewing or designing a plan to protect wealth, we judge its accuracy across four degrees, or directions.  If you picture a defense plan as a wall between the risks to a financial position (see here for earlier post) and the prosperity being pursued, how tall and how wide that wall is the visual reference for our judgments.

How high the wall goes is the extent to which the plan will protect against really bad consequences.  It’s what we judge to be the degree of inclusiveness, and common questions are, “what if the entire house burns down?”, or “what if you hit the bus full of lawyers?”.

How low the wall goes is the extent to which the plan maximizes the most cost-effective approach.  It’s what we judge to be the degree of efficiency, and common questions are, “are those deductibles high enough?”, or “can we drop the home warranty coverage if we have other mechanical breakdown options?”.

How far the wall stretches is the extent to which the plan captures and traps the risks we should worry about.  It’s what we judge to be the degree of thoroughness, and common questions are, “have we considered a reputational hit on the business after a public embarrassment?”, or “have we considered the cost to bring this old home up to current building codes?”.

How deep the wall goes is the extent to which the plan can withstand a loss.  It’s what we judge to be the degree of robustness, and common questions are, “will I be forced to rebuild my home, or will I have a cash settlement option?”, or “will I have my own attorney represent me, or will it be someone who doesn’t know me?”.

We believe the right answer is always a customized one that addresses the unique needs of the family, but these four ingredients are always present.  For a plan to be of good quality, it needs to be built intentionally and we feel consumers should know where their plan stands in all four of these measurements.

Four degrees of wealth defense quality 5-17