A Great Opportunity

A great opportunity exists for those who want to make a difference in their communities, clients’ lives, and businesses on a professional level.

Insurance was created to protect people’s and businesses’ assets, i.e., to protect their balance sheets. When a house burns down, insurance is designed to provide the policyholder with the money to rebuild that asset. When someone is sued, insurance is designed to cover the suit. Otherwise, the policyholder would pay defense fees and the settlement out of their bank account, i.e., out of their savings, meaning they would lose some or all their assets. Insurance is 100% designed to protect assets.

Even with business income, where insurance covers an income stream that would have been, that income stream is an asset. An asset is always on a balance sheet and never on an income statement.

Yet, somewhere along the way, agents began selling insurance as if it was an expense. An expense is an income statement item, never a balance sheet item. When people say, “Don’t sell price,” they mean do not sell insurance as if it is an expense.

Insurance is a trade-off between an expense and asset protection. It is the perfect example of double entry bookkeeping whereby a positive is always offset by a negative. The problem is that agents do not understand the positive, the asset protection. Most producers and account managers do not understand that insurance is a balance sheet tool. Just like their customers, agents think of insurance as an expense that no one wants to pay. People do not want to buy insurance because no one takes the time to explain the benefits received for the cash outlay.

We have a misalignment between what insurance is designed to do and how it is sold. No wonder considerable friction exists.

A Legal Contract

The problem has been exacerbated further by pretending that insurance is simple to understand. Insurance is anything but simple. Insurance is governed by massive case law and long legal contracts. The reality is that an insurance policy is a legal contract between the insurance company and the insured. Agents are selling a legal contract. Almost no agents have law degrees, so insurance had to be simplified so that the sellers and buyers could understand it, not so for the carriers, though.

Sellers often exacerbate the situation further. Most of the people who deal with insurance contracts are people who not only do not have a law degree, but most do not have a college degree. I am not denigrating a high school education, but when dealing with complex legal contracts, education is usually beneficial.

A few companies have gone further by selling contracts as if the consumer is buying penny candy instead of a complex legal contract. Where else in life does one go to buy legal contracts for which they do not pay their own attorney?

Where else does one go for financial management advice (and insurance is clearly a financial product) to someone who does not understand balance sheets?

Few account managers and relatively few producers understand balance sheets, yet they are selling a product designed to protect balance sheets.

In a concise assessment, here is the status of insurance sales: Insurance is sold as if only the consumer’s expense is a factor, that no asset protection offsets the negative, and that the product is so super simple that anyone, including cartoon characters, can sell it in a manner that is good for consumers and businesses.

This position has developed through a complete warping of reality caused by people in whose best interest it is to convince consumers and businesses that all insurance is the same and the only differentiator is price. This came about because insurance is complex, and most consumers do not understand what they are buying. They do not understand the exclusions. They do not understand that the exclusions have inclusions, which then have another subset of exclusions. They do not understand the seemingly oxymoronic terms and kinds of insurance such as, “owned/non-owned auto” and “blanket coverage” (who really needs insurance for their blankets?).

When selling a complex product to people who have little understanding of what they are buying, especially when the seller does not really understand the product either, the only solutions are to pretend to make the product simple and/or educate the client. One cannot educate the client if the salesperson is not first educated.

The Opportunity

A great opportunity exists in returning insurance to the truly valuable financial tool that it is, which is to protect assets.

If you really want to do a great job for your clients, your communities, and your agency, then you must approach insurance as a professional does and in doing so, you will learn about your client’s exposures.

Exposures are potential losses to a client’s assets. When you understand your client’s exposures, which requires a conversation, you can share with them the fact they could potentially lose some or all their assets, and that you have potential solutions. Those solutions may include insurance policies chosen specifically to match the coverage the client needs for that exposure. Or they may include specific risk management strategies when insurance is inadequate, does not exist, or is too expensive.

Being professional requires confidence. A great many producers cannot stand the thought of telling clients what a policy does not cover for fear the client will shop them. A professional believes in transparency, and by working closely with their clients, the lack of insurance coverage will be replaced by risk management solutions.

If we go back to the basics and approach an insurance sale from the perspective of protecting a client’s balance sheet, insurance becomes much simpler to sell — but you must first truly understand balance sheets. Discussions with your client will become easier because an alignment is created between the product and the sales message. Clients are then far more likely to buy the coverage they really need.

Being a professional and selling insurance in this manner is not for the weak-hearted. It is for those who truly want to do good for their clients and are willing to put forth the effort required.

One of my favorite quotes, which I first heard from the famous basketball coach Bobby Knight, goes: “Everyone has the will to win, but few have the will to prepare to win.” Do you have the will to prepare to provide your clients with the solutions and advice they really need?

For older producers who already make enough income, this may not be for you. For those who believe technology can identify when to offer a new product without talking to clients in depth, this is not for you. The opportunity is for those who want to build long relationships with clients and know they are doing good work.