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Buying Insurance is Better With an Insurance Agent

Buying Insurance

Every industry wants to see improved customer satisfaction rankings, and this year the insurance industry is seeing huge improvements in overall customer satisfaction. In fact, according to the recently released JD Powers 2015 Auto Insurance Study, even millennials have expressed a sharp increase in satisfaction with their auto insurance provider. The study actually finds that while there is increased demand for more online services, millennials, like older generations, still want direct communication and even face-to-face interaction when buying insurance.

I’ve actually seen this first-hand. In my prior life, I worked in a leadership role with some well-known direct-to-consumer insurance companies and we saw similar behavior. For example, consumers would start a transaction online but completed the quote or endorsement with a customer service representative or sales counselor. Moreover, during my tenure with those insurance companies, sales conversion was always better when a sales agent was involved.

This seems to make sense, it’s human nature to want to validate your choices prior to committing to an important decision. This brings me to the point of this post. Buying insurance is an important decision.

Buying insurance is an important decision

Insurance is integral to the fabric of our very economy, it provides security to all of us equally, from the largest corporations to the smallest of family units.

It’s an extremely significant part of our economic fabric. So much so, that we feel the need to regulate the providers, providing rules and structure to promote the public good, and mitigate against insurer insolvency.

There are thousands of laws and regulations controlling how rates are set, claims are settled, that measure the balance between statutory surplus and premiums written.

This is serious business.

Yet, insurance company advertising can make it sound like a simple commodity … like a cup of coffee.

The 15% for 15 minutes syndrome

In the late ’90s, GEICO rolled out their innovative 15% for 15 minutes advertising campaign. Along with the GEICO Gecko, the 15% commercials have been a huge advertising success and are now part of Americana.

It totally makes sense that GEICO would use an aggressively priced savings call-to-action in their advertising, they don’t have contracted insurance agents to promote their brand, to advocate for the value of their insurance products. They only get 30 seconds of television spots to make a pitch, so you better appeal to emotion, right?

What doesn’t make sense is how the rest of the industry fell in line and created similar advertising.

Even GEICO, the champion of price promotion, believes they are a high-value product, and not a commodity driven strictly by the value of the price charged.

Insurance agents who represent premium brands, like Travelers or The Hartford, are constantly lectured by their insurance carriers about why the price is not the sole reason to purchase or sell an insurance policy.

It’s all true, price is not the sole consideration. It is, however, the easiest thing to understand.

Not all insurance is the same

Because the price is the easiest thing for consumers to understand, many insurance advertisers and insurance sales agents continue to promote price in advertising.

This all leads consumers to believe that there isn’t anything that distinguishes one insurance carrier, or policy from another. It’s all just s set of limits, deductibles, and premiums.

Nothing can be further from the truth, not all insurance carriers or policies are the same. In fact, there can be huge differences in the amount of coverage offered.

The differences between the two insurance policies are not necessarily in the limits of liability, or the deductibles offered. It’s likely in the policy language. The policy language is what controls when the limits of liability or coverage will be extended.

An insurance policy has all kinds of definitions, exclusions, duties, and conditions. They can be written broadly, affording more coverage, or more narrowly to reduce the amount of coverage offered.

The coverage is like the raw materials for an insurance carrier, if it was a car, the border coverage would be a higher-end brand (think BMW), and the narrow coverage policies are more like … well a Gremlin.

If you were shopping for a car, and someone told you that you could buy a BMW or a Gremlin, you wouldn’t select the Gremlin just because it saved you a few dollars. That would be silly because they aren’t really in the same class. But this is what we frequently do when we buy insurance.

We select a lower-priced policy without understanding the difference in the coverage offered.

Buying insurance online is a good option

I have frequently said, buying your insurance online is a great idea, but only if you know what you’re doing. It is especially important to know what you’re doing if you buying off of a comparison quote site.

It’s too easy for a consumer, without an understanding of the differences between insurance contracts, to think a policy sold by Access General Insurance is the same as buying a policy from The Travelers. They’re not.

Without a good consultation, it’s very easy to make a bad decision.

In days past, insurance was sold one-on-one. The insurance agent would actually come to the home, conduct an inspection, explain the coverage, and review the application. Those days aren’t coming back, but a good consultation can still be done.

It is important for an insurance agent to explain the exclusions and conditions of your insurance policy. You need to know the way the policy language extends and restricts coverage, where there may be gaps in coverage, and how those gaps are covered by other types of insurance policies.

Your insurance agent should understand your financial condition, without understanding the assets at risk, it’s difficult to select the right level of coverage.

If you aren’t taking the time to understand what you’ve purchased, if your insurance agent isn’t providing you with a complete consultation, then you’re more likely to be disappointed in your insurance coverage.

This is why we teach our agents a consultative approach (In the spirit of transparency, we freely share this old training presentation):

What is really off-putting is that the insurance carriers don’t actually believe this price pitch themselves.
None of this is to distract you from the price. Of course, you don’t want to pay too much for your insurance protection. But if you just pay less and get no protection, you actually paid too much. There is a balance, and without a complete consultation and review, you can’t really know what is right for you.

You will be surprised too, there are many great insurance carriers that offer great protection, and the rates that are charged aren’t that different from the budget carriers.

The bottom line

Insurance is an intangible good, one we never intend to use. This makes it easy to make your decision based strictly on price, especially if you don’t fully understand the difference in the actual coverage you may (or may not) get. We encourage you to work with a professional, get a full consultation, and make an educated decision. Many insurance agents will give you a fair assessment of the policies you may be considering … even if they don’t represent that company … at least we will. 🙂

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