I give up! I’ve been talking to walls long enough. I’m flipping my perspective from carriers’ financial strengths being important to not caring at all about carriers’ financial strengths. Why am I changing my perspective? Because most agents, like around 90%, don’t pay any attention to carriers’ financial strengths except to avoid the most toxic. If 90% believe a certain way, the 90% must be right, right?
Instead, I will focus hard on suggesting agents have the most carriers possible so they can always find some market to write whatever turns up at the lowest price. There are around 1,000 P&C carriers. Excluding captives and reinsurers and adjusting for the number of carriers available in any one geographic area, there are likely 500-700 carriers available in any given market. Only representing 20 is not nearly enough! Get with it. Join a cluster or network that gives access to at least 200! Otherwise, the agency is at a serious disadvantage and might miss out on that $300 sale. Losing out on $300 could be catastrophic to your income and ego. Don’t let that happen. Do something. Find more carriers!
When looking for carriers, quite often the worst carriers from a financial perspective, have the lowest rates. This is why a few years later their loss ratios skyrocket. They were not charging enough. Focus then on the low rates because if you have 500 carriers, you’ll always find some other incompetent carrier three years from now offering low rates too. Sure, it is a hassle to have to move books every few years from one incompetent carrier to another but think of all the $200 sales you’ll make! You will probably increase sales 10% annually for a few years.
Also, your clients will like you more because we all know that all insurance policies are the same and the only thing that matters is the rate. I don’t even know why agents need to take CE courses to learn coverages if all policies are the same. Any idea why insureds or carriers need agents if all the policies read the same?
I suppose the stupid jokes in insurance commercials are another differentiator along with price. Which commercials do your clients like the best? Keep this in mind when selling. You might be able to increase your sales with this knowledge.
And most insureds don’t have claims annually so the fact that weak carriers often have poor claims service will go unnoticed by most of your clients. What difference does it make to write business with a weak carrier if the insured never “uses” their insurance? Right? Genius perspective, I know.
Some of the weak carriers are even more prone to paying agents “extra” compensation. This is because they have nothing else to offer and they are financially weaker. To keep business, all they can do is entice agents with more money. This is a great reason to write with weaker carriers. Another genius insight I’m glad to share.
Another reason to write with weak carriers if you don’t own an agency is because you don’t have to worry about profitability. You just make sales and let the owners figure out how to make a profit. Sure, the staff have to work harder with lousy carriers, the retention rate is lower, and the underwriting hassles are greater (weak carriers might tend to pay underwriters less or employ too few underwriters), but, hey, that is someone else’s problem and not yours! Your job is to make sales so the more carriers, especially desperate carriers, the better.
The best carrier is one that cannot distinguish between a good risk and junk. Here’s how to figure that out. If all the other carriers are quoting $5,000, or higher, and the incompetent carrier quotes $3,000, they can’t distinguish junk. Go for it! Underwriting is not what you get paid to do. You don’t get paid to advise a carrier they are not charging enough for the risk. Sure, it’s smart to advise them, but you don’t get paid to do so. Mind your own business, right?
And when a weaker carrier gets squirrely causing concerns and complaints from your clients, just blame awful, horrible insurance companies. Consumers dislike insurance companies and think they are all cheats, so they’ll buy your excuses. They won’t check any facts and they’ll still like you. Liking you is what is most important, right?
Another benefit of not paying any attention to differentiating between the better carriers is that takes time. Save time by ignoring that research and use the time savings more productively by selling more $300 policies. The marketplace for $300 policies is infinite, so go get them!
Someone asked me about reciprocals the other day. Reciprocal insurance companies often include an assessment clause in which they can demand their own insureds give them extra money with which to pay claims in the event they run out of money with which to pay claims. Some people might consider this kind of carrier, at least sometimes, a weak carrier but when was the last time a reciprocal placed a call on their insureds? Exactly, right? There’s no need to even pay attention in this situation because it hasn’t happened recently so it’s not going to happen. Don’t worry about it.
Insurance companies are all the same regardless of if they are a stock carrier, a mutual, a reciprocal, a risk retention group, etc. Nothing else matters (great Metallica song) but always having the lowest price. To always have the lowest price, the agency needs to have access to the most carriers, and especially the weakest carriers. Smart carriers often charge the right rate, but too often the right rates don’t sell!
And this is a crucial point. If an agent does not know what they are selling other than generic policies from generic but always unreliable insurance companies, then the agent needs rate to sell the policies. Rate sells. That is clear in advertising. Judging by many carriers combined ratios, their rates are too low. Look at bad combined ratios and then do a rate comparison to learn if you might have an opportunity to sell less than adequate rates. If so, you’ll be able to sell even more $300 policies!
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.
None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.
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