Commentary May 22, 2022 at 07:44 AM Share & Print
What You Need to Know
- You know which issuers are safe.
- You can help clients understand what they really need.
- You also know which options are just bells and whistles and which really matter.
Everyone wants to eliminate the middleman.
Years ago, people said: “I can get it for you wholesale.” Online trading allows investors to buy stocks without paying brokerage commissions.
Can your clients buy insurance the same way? Yes, they can. No, they shouldn’t.
Let’s stick with the investing analogy and buying stock online.
If your clients did their research, found a company they really liked, wanted to buy it and maybe hold it forever, buying online makes sense.
Why? Because the clients did all the research beforehand and simply needed someone to execute the trade.
Time for another analogy.
Clients are thinking of buying a Louis Vuitton purse. They might be interested in the iconic Speedy bag.
Sotheby’s indicates it’s the most collectible Louis Vuitton purse. Clients can buy one at a Louis Vuitton boutique for about $ 1,550.
A client might buy a used bag at an auction house like Sotheby’s. A client might find one for sale online. A client might meet a guy in a pub who offers to sell one he happens to have in the trunk of his car.
Where is the best place for the client to buy the purse?
Probably the boutique or the auction house, where the client has direct contact with a specialist and a firm standing behind its authenticity.
Make sure your clients understand that insurance kind of works the same way.
Here are seven reasons buying insurance is less like buying stock and more like buying that purse.
Insurance is a complicated product with many moving parts. What if I clients say, “I can buy my own life insurance, health insurance and annuities online. I don’t need you to help me with that.”
Here are seven things to tell them.
1. Is the seller legitimate?
Imagine buying that designer purse online and getting a great deal. The photo is perfect. It’s the real thing. Unfortunately it never arrived.
Insurance: Your client found a great sounding policy on the Internet.
Your client never heard of them, but the name sounded legitimate.
Aren’t all insurance companies regulated?
Your client sent them money, but there was no insurance company. The website disappeared. What a mess.
You, the agent, can save the client from that mess.
2. Is your client buying a fake?
Your client knows there are plenty of fake designer bags out there. Some look pretty good.
If your client paid a thousand for a purse on the internet, how would the client feel if about getting a crude knockoff?
Insurance: When buying dental insurance, for example, your client would want a product that does a specific job and provides the expected benefit and coverage.
Your client wouldn’t want a “policy” that wasn’t actually insurance, but merely access to a dental services discount program.
You can help your client find the right product, rather than a product that looks like the right product but is something else entirely.
3. What happens if it gets damaged?
If your client buys a purse from a Louis Vuitton boutique, they have a procedure for making repairs if necessary.
If your client breaks the zipper, Louis Vuitton can replace it with another authentic one, preserving the value of the purse.
Insurance: Some insurance companies settle claims and pay faster than others.
You, the insurance agent, can help with comparing similar-sounding coverage from different carriers.
4. Did I buy the right one to meet my needs?
Your client always wanted Louis Vuitton luggage. Your client finally took the plunge and bought a hard-sided suitcase.
It is beautiful and could do double duty as a cocktail table in the client’s living room.
However, your client always does carry-on luggage on a flight.
The hard-sided bag won’t fit into the overhead bin.
Insurance: Policies are difficult to compare side-by-side because there are different features, coverages and deductibles.
It’s a problem if your client buys a legitimate policy, pays premiums for years and discovers, when it’s time to file a claim, that the policy covers the wrong things.
You, the agent, can help the client pick the coverage best suited to the client’s needs.
5. Is the product safe?
Your client bought a genuine Louis Vuitton purse. That’s what the guy at the flea market told the client.
Sometimes there are defects in manufacturing triggering product recalls.
Unfortunately, the genuine Louis Vuitton bag had a terrible flaw. The client would be much better off with a different Louis Vuitton bag without the flaw.
Something similar could happen with an insurance product. But the client is unlikely to hear about any “recall announcements” if the product, or the insurance company that issued it, has a flaw.
Insurance: Your client needs your help with separating the good products from the lemons.
6. Will it increase in value?
Let’s assume everything your client buys either appreciates or depreciates.
If your client buys designer luxury goods from brands like Hermes, Cartier, Tiffany or Louis Vuitton, the iconic designs tend to hold their value or even appreciate. Fakes do not.
Insurance: Your client bought life insurance because of friends who talked about life insurance building cash value.
Unfortunately, your client bought term instead of whole life, because term life was cheaper.
Your client might be surprised to discover that the term life policy doesn’t build cash value.
A good insurance agent like you can help explain the differences between different types of products.
7. You get what you pay for.
Your client wanted a designer purse.
Your client considered the Louis Vuitton Speedy bag but opted for a mass-market brand, because it was cheaper.
The mass-market bag wasn’t as well-made and soon falls apart.
Insurance: Many insurance products and policies may sound similar, but some issuers are stronger than others.
Your client should have a product with an insurance company with a high safety rating awarded by an outside ratings agency, such as AM Best, Moody’s or S&P Global Ratings.
The coverage from a low-rated issuer is, really, a different product from coverage issued by a high-rated issuer.
Good Advice Pays for Itself
So, certainly, there are many opportunities for your clients to eliminate the middleman, even in the world of insurance.
When your clients know exactly what they want and can confirm the authenticity and value of what they’re buying, handling a transaction on their own can make sense.
But, when clients are dealing with a complex product, it will pay for them to get professional advice, even if they have to pay for the advice.