INSURANCE MARKETING ISSUES
THE selling of insurance is a balancing act of many disciplines. There is need to determine your clients’ needs as well as your conduct as an agent, in choosing a safe and appropriate insurance product for your prospective customers.
Do you know for instance what the legal responsibilities are, before and after the sale? Do you know when you exceed your role as an agent and assume additional exposure? If conflicts occur, are you able to settle them reasonably, and do you have procedures in place to help avoid conflicts from reoccurring in the future? What about consumer protection issues? Are you someone who learns from the mistakes of others?
Good sales conduct, is a responsibility you have to choose to uphold to do a better job for your clients and for your own reputation. It involves making reasonable decisions for your clients after analysing their needs.
If you need more reasons why you should practice proper sales conduct, here is a short list; Appropriate conduct, might keep you from being sued by a client or your insurer, the cleaner your record, the less involved underwriters will be in the sales process, that is, you have more control over the sales process and with less compliance hitches or pitfalls.
Sales conduct violations can drive up the cost of doing business which could affect your commissions, or, completely replace the current system of incentive pay with a salary or another form of measured compensation. In simple language, violations can mean less income for you.
Additionally, sales conduct problems can erode the public trust which can cut into your sales, especially that, sales conduct lawsuits are now part of how insurance companies are rated.
More lawsuits could mean a lower rating and a harder sale for you. There are many industry groups and agent associations who feel that the movement toward sales ethics is way behind schedule. Too much emphasis and money has been spent on grooming sophisticated salesmen, they say, when there is a greater need for agent diligence and fair dealing.
The cornerstone of this agent diligence is now called agent due care or sales conduct. Roughly translated, the meaning of sales conduct is an agent’s professional and ethical handling and choice of company, product and sales presentation to best serve a client’s financial planning.
Others have embellished on this definition where the practice of sales diligence might read like this: Proper sales conduct requires agents to be suspicious of policies that sound “too good to be true.”
Agents are required to conduct business according to high standards of honesty and fairness and to render that service to customers which, in the same circumstances, they would demand for themselves.
Provide competent and customer focused sales and service. Engage in active and fair competition. Provide advertising and sales materials that are clear as to purpose and honest and fair as to content. Provide fair and expeditious handling of customer complaints and disputes.
If you went a step further and combined legal conduct and sales conduct you might run your business by the following; I will know everything possible about my client’s financial and insurance needs. I will have a complete understanding of all products I sell and present them fairly.
I will find the most suitable product for my client and make sure I place him with financially capable companies with respect to the competition. I will document any lack of knowledge with a full disclosure agreement. I will request each client to sign a binding arbitration agreement for any potential misunderstanding or dispute.
While it would be wonderful if every agent lived by these rules, real world situations often get in the way. Taking the time to follow each and every rule would probably add to your work load. On the other hand, a little less free time today might save you considerable time and money by avoiding a major legal confrontation later. Likewise, the loss of a policy sale or two today might make it a whole lot easier to sell one, or be referred one, next time.
Fundamental to sales conduct is the understanding that all insurance is constructed of the same elements, expenses; experience, claims risk or mortality and returns or profit. Therefore, a policy that appears to be significantly better than others in the marketplace should be suspect.
Once a suitable product can be found, the decision to buy should be based on the assumptions in the policy and the financial stability of the company. Policy illustrations and quotes are one method to make this assessment.
Unfortunately, agents and clients rely too much on these presentations to the extent that policies are rarely read. As a result, agents should be sure that any projection or estimate, discloses the assumptions that went into the projection, and the fact that variations in these assumptions can significantly change insurance results.
With reference to agents choosing safe companies to insure their clients, it will be demonstrated that sales conduct involves many disciplines including: disclosure, diversification among multiple carriers, product variation diversification, regulatory knowledge, multiple rating verification, key ratio comparisons, periodic monitoring and more.
A recent survey is a painful reminder to the industry that the road to agent diligence may still be cluttered with potholes and a fair share of detours. Twenty insurance agents were tested on their accuracy and clarity in explaining their insurance products and the role they played in a client’s financial planning. Most of the agents failed simple standards of due care, including the ability to demonstrate simple financial assumptions concerning the solvency of a chosen insurer, either at time of purchase or later.
Agents must realise that they are selling more than an insurance policy; they sell security, peace of mind and freedom from financial worry in the event of a catastrophic event or claim.
How and where they place client business can be hazardous to their financial health and moral responsibility to the people they serve. This takes on special meaning to agents when they discover that lawyers want to prove that the supplied financial condition brochures may not be enough to demonstrate that an agent did his best in selecting a particular carrier.
An agent’s legal conduct in choosing a company centres on the ability to direct a client to an insurer that is solvent at the time of purchase and able to meet its contractual obligations.
Sales conduct considers diversification, to spread risks among carriers and to meet government industry regulators, and on-going monitoring by private rating services.
Policy owners depend on agents for choosing insurers because they are generally unsophisticated in analyzing the financial complexities of solvency. Agents help businesses and individuals buy property and liability insurance cover to minimise current financial losses.
Life, health and annuity policies cover losses of future economic standing. In both cases, the purpose is to shift the financial consequences of loss Sometimes, however, policy owners find that, the safety net they bought is not always as safe, as it started out to be.
Look out for part III.