Broker and Insurance Policy Value

People are always talking about the commoditization of insurance and the future of independent brokers. I believe that brokers will always play a role in certain insurance. However, brokers add cost to insurance, so clients have to see value. Some do see value, some will never see value (or perhaps there isn't much) and some are in the middle and can be pushed either way.

It's always tempting to compete on price. Everyone understands money in their pocket, and it doesn't take much expertise as an agent or broker to do it. And if you compete on pure price and nothing else, the broker will eventually get squeezed out of the transaction.

Those that have moved to buy their insurance online believe that they don't need professional help to buy insurance. And, in some cases that's true. The people who buy state minimum auto insurance for their 20 year old junker car don't care about claim service or higher policy limits.

And I think for low claims frequency accounts this will always be an uphill battle. People are bad at preparing for the 100 year flood, but much better at preparing for the storms that come every year. If you have an insurance policy that you haven't had a claim on in at least five years, it feels more like protecting against something that will never happen. You're apt to keep buying it at bottom dollar, if at all.

However, the larger accounts that have a few claims every year, tend to care about more than price. They know they need a broker to help navigate the waters. Perhaps even risk management consulting. For them, the cost of the policy isn't the only cost. It's also the dollars they recover from first party claims, minimizing third party claim payments, claims reps that care, nuanced coverage that fits unique exposures, choice of council and 100 other things.

It's easy for me to sell value and knowledge to my clients that have the storms. The challenge comes to show value to the smaller clients. And that's why those clients end up with policies that don't cover everything or an agent that doesn't understand the exposures....they want bottom dollar. For these clients, until they have a claim, the policy is a commodity.

A good broker takes on clients that have a real need for his services. He adds something to the transaction in exchange for what he is paid. Those are the brokers that understand the coverage available, the difference between carriers, and have the risk management experience. There will always be room for anyone providing a service with real value.