From agent to advocate

Related to the last post, I’ve taken stock into how our jobs as risk advisors have changed.  It used to be that we’d recommend a risk-financing strategy, find an underwriter best capable of backing it, and then sell the consumer on why the plan makes sense and why that underwriter is the best for them.

These days, we still recommend a strategy, but we spend more time selling the underwriter on why they should take-on the consumer than the other way around.  Maybe over time our job will continue to evolve from an expert with the eyes & ears of the underwriter to an expert who best understands and advocates for the client.  I’d prefer that.

And in defense of the importance of that position, just ask me how well I think the consumer is generally protected by relying on what they can get a) online by themselves, b) from an insurance-company employee, or c) from an insurance salesman.  The proof I’ll share will come from real losses, real claims, and real disappointments where somewhere along the line someone didn’t design the plan correctly and didn’t choose their underwriter wisely.

Photo: Amber McGraw, Silfra in Thingvallir National Park, Iceland

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2 ways to do things

When I review portfolios for families it’s sometimes easy to tell between the ones that are done right and the ones done so the agent could make the sale.  It’s hard to describe the distinction, but it’s like the difference between giving a gift wrapped in a grocery bag vs. giving one wrapped by Martha Stewart.  Both conceal the gift, but really…

And this is separate from the major coverage mistakes often made by agents that I discuss in earlier posts, and this has nothing to do with how expensive the insurance is (more often, it’s just the opposite).  Instead, it’s a function of the effort of the agent made in questioning “is this really the best way to do this”?  And as I’ve said before, most agents in an effort to make a sale will just quote based on exactly what you’ve had for years even if it’s no longer what you need.  Look instead for an agent who will slow things down, ask unique questions about your needs and perhaps present a totally different way of taking care of those needs.

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Specialist vs. generalist

When you are interviewing an insurance advisor for your family, I think the first question should be whether you want an insurance generalist or an insurance specialist.  There’s no “right” answer, but I think there is a difference.

On the one hand, a generalist could handle a whole basket of insurance needs, like those for your homes, cars, liability, life, disability, annuities, health, business, travel, professional liability, non-profit, etc.  A one-stop shop, if you will.

On the other hand, a specialist can get you exactly what you need and nothing more. That’s because they’re an expert at one thing.  And an expert knows more than a generalist, by definition.  An expert has more power and influence with insurance companies, too.  An expert has no Plan B, so they’re all-in with whatever you need them for which might be necessary when something really bad happens.  And lastly, an expert has no distractions or divided attentions so they’ve got nothing else to do but practice their craft for your benefit.

We’re proud to claim to be experts at one thing – protecting personal wealth against unfortunate events, lawsuits, and unscrupulous people.  We believe consumers are treated better and get better results when an expert is on the case.

Photo: Rachael McGraw, Snow Lake, WA

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Death of the (lazy) middleman, please

A recent online business journal’s headline: The Death of the Middleman.  Maybe so when what’s available for sale and what is wanted by the consumer is obviously, easily, and profitably matched.  I don’t think we’re there yet with risk management and insurance.

On Monday I told a family what I thought they needed in order to be financially protected. On Tuesday I listened to an insurance company tell me what they’d require from that family in order to qualify for their insurance.  The two didn’t match.  So I’ve got a willing consumer who needs X and an unwilling insurance company who will only provide Y.

That happens a lot.  And what also happens a lot in response to that, unfortunately, are agents who a) give up looking for creative solutions, or b) don’t tell the truth and try to sneak an insurance company into providing insurance they don’t want (you can imagine this doesn’t work well if a claim occurs, by the way).  So there are a whole bunch of families out there with bad insurance because too few agents are willing to go find improved solutions.

And on the other side, insurance companies keep lopping off the ends of what counts as “good business” in their eyes.  They keep slicing thinner and thinner what defines an acceptable client with things like pricing algorithms, “no-more-than” guidelines, and “only-if” scenarios.

That’s fine – it’s their business.  But my business is showing how a good middleman is valuable.  Insurance companies are governed by boundaries and generally limited thinking and being a middleman able to find the differences among them can make a difference between “you’re covered” and “nope, sorry”.

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How to compare agent A to agent B

Insurance agents don’t send their customers a bill for their services.  I bet if we were allowed to do so it’d actually be better for consumers because then there’d be a metric for measuring and comparing value-for-cost between different agent options.  The good ones would thrive and the bad ones would need to adapt.

But even though agents are required to accept revenue only as commissions from the insurance company, you can still choose an agency based on the value you get from their work.  I feel that comparing that value should hinge on the following:

Knowledge  They should have a deep combination of book smarts, experience, & street smarts.  New people tend to fizzle out in this industry and long-experienced ones tend to have many fascinating stories that probably relate to what you need to consider.  When they tell you X and recommend that you follow their suggestion, are they right?  Is it the best possible answer for your situation?

Action  Who does the work?  Will it be the person who knows you best, or will they assign tasks to people who don’t know you?   When the agent promises something will happen, does it?  Will the agent be available when you want them to be, or will they only talk to you when they need to sell you something?

Growth relationships  Will the agent be there for as long as you need them, or will you be training new agents on what’s important to you?  Has the agent ever chosen what’s best for their client vs. what’s best for them?   Can you see yourself being proud to recommend them to family and friends?

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The gray line between business and personal

Many business owners consider the line between what is commercial business and what is personal business quite gray.  The cars they drive personally but pay for through the business, the personal errands run by company employees, the use of company equipment/technology/inventory borrowed for personal use (and vice versa) are all examples.  And there are plenty more.

Many business owners don’t consider their lives divided between personal and business and instead see it all as just “them”.

It’s impossible to script “the way things should be done” when it comes to drawing a line between what is insured personally and what is insured commercially.  But it does matter because the quality of insurance differs greatly between the two and you’ll want to get it right.

With good listening skills and a committed work ethic, a plan to divide the insurance between business and personal is something that good agents are not just able to do, but they are also able to explain it so that you’ll understand and agree.

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Leaving the choice to you makes for a bad agent

Would you accept your tax accountant presenting you with 3 options on the filing of your tax return?  What about your doctor giving you a choice of different ways to fix your broken arm?  No way!  Experts are supposed to know what is best for you, recommend a specific course of action, then get it done for you.  Why else would you hire someone?

So it pains me every time I see an insurance agency presenting families with multiple insurance-portfolio options.  It always makes me think either a) they haven’t done enough work to really know the customer, b) they don’t have a clue which alternative they should recommend, c) they lack confidence to take a stand, d) they’re lazy and want the customer to do the work, or e) they care more about running their business than caring for their clients.

I am all for consumers being the boss and having a final say in things, but it should be only after an expert has worked hard enough to make a recommendation they’re willing to stand behind.

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Choose an insurance adviser in 4 questions or less

Discerning consumers ask good questions of advisers whom they hire for advice and service. Undiscerning consumers are influenced by geckos and talking price tools, and probably don’t think using a middleman is necessary.  If you’re among the latter group, good luck to you – you’ll know if you chose wisely after the loss happens.  If you’re among the former group, however, here are 4 questions that will help you decide if you’re putting your trust and faith in the right place.

  1. If I follow your advice and you become my agent, how much of my interaction will be with you vs. a member of your staff or service team?
  2. How much authority do you have in your agency to make any decision necessary to better my interests?
  3. Would you describe your agency as “full service”, or do you have a dedicated focus in one area of expertise?  And if you’re an expert, describe for me how deep your knowledge and experience goes.
  4. Give me an example where you’ve gone over-and-above what you think your competitors would do for their clients?

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