The roll of the insurance broker is evolving. More and more often insurance brokers are being asked to provide more than just insurance placement services. As we move forward over the next few years and as the financial and economic climate continues to evolve, financial service professionals, such as insurance brokers, will be expected to provide broader services and more aggressive negotiated results for their clients.
In the past, and up until now, many insurance customers have chosen to place their coverage with brokers they consider to be friends (be it a golf buddy, classmate, neighbor, relative, etc.). For decades these types of friendly relationships were the preeminent means by which insurance brokers were able to retain clients in the face of competition. Be it guilt, a sense of loyalty, or another altruistic motivation, clients feel that they owe their insurance broker(s) something and exhibit palpable amounts of regret when it comes to leaving one broker for another.
As recent as this morning, I was in a client’s office where they were wrestling with the idea of choosing us (GDI Insurance) to replace their broker of over 10 years. Even with our re-engineering their account, being able to add considerable amounts of coverage, and still being able to reduce their overall premium expense by nearly 38%, they still felt guilty for wanting to switch. When I as a customer hire a mechanic to work on my car, a plumber to work on my faucet, or an arborist to prune my trees; I typically go with the highest level of service that I am comfortable paying for. But when it comes to insurance, many clients feel that they are betraying a “friend” when they move brokers.
Think for a quick second about the example above and what if the client had been paying an extra 38%, give or take, for each of the last 10 years with the other broker. That means that the client would have unnecessarily paid for an extra 4.8 years of insurance coverage. The example proves that the primary issue insurance customers face with the “friendly” type of insurance relationship is not that it leads to a lack of coverage, but rather that it leads to a lack of service and savings due to the lack of aggression in their brokers level of negotiation of coverage terms and premium rates.
When insurance brokers believe that a client will remain loyal to them and not allow other brokers to work for the business, it creates an atmosphere where the broker is no longer incentivized to work in his/her client’s best interest, but rather to maximize their compensation while doing just enough to keep the client from contacting another broker.
A client’s insurance program, regardless of size, should have a plan for the future. A plan changes the dynamic of the client-broker relationship from the broker being a “friend” who gives the client their only insurance option(s), to a liaison and partner who works with the client to attain measurable goals that the client can then track and use to evaluate the brokers performance.
I hate to be the bearer of bad news for all the “old-school” brokers out there, but there is always “that guy” that must say it how it is and I guess I will go ahead and do it...
The days are numbered for the lazy insurance brokers of the industry. No longer is it enough to merely quote and socially sell insurance as clients are starting to demand quite a bit more.
-Matthew Davis MBA, AAI