Insurance is confusing even to those who have made it their avocation. What can an insurance buyer do to get the best product at the most reasonable price? Of course, using a good consultant is invaluable to help you wade through insurance jargon but there are also common sense things that can be done by everyone—regardless of whether you have any insurance expertise.
In my opinion, one of the scariest things today is insurance sales over the internet or through direct mail when the person selling such policies has limited insurance knowledge. I have personally contacted companies that offer insurance products over the internet and through direct mail, and I have found that the representatives selling the products lack technical knowledge. Often very simple questions are confusing to them. For instance, I asked the representative to explain “automobile medical payments” coverage to me over the telephone. He failed miserably. Not only did he not explain the coverage properly, he provided incorrect information.
The main advantages of internet and direct sales methods are price and convenience. However, there are exclusive agents and independent agents who can sell at or below prices being offered over the internet or through the mail. The key is that you must find them. Certainly, the convenience of the internet and direct mail is a real factor. However, this can be countered with use of email, a fax machine or by visiting the web page of insurance agents or consultants. Go ahead and get a quote from the internet companies, but do not make an insurance policy purchase until you have completed your due diligence, which includescomparing their policy coverage and pricing to
what other insurance companies offer you.
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How do you go about finding a good insurance company or agent? The yellow pages and local newspaper advertising is a good place to start. Referrals are also a method of getting names; however, as mentioned earlier, you should not place too much weight on the fact that someone was referred to you. You should still interview the person thoroughly before allowing them to become your insurance representative.
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How do you go about finding a good insurance company or agent? The yellow pages and local newspaper advertising is a good place to start. Referrals are also a method of getting names; however, as mentioned earlier, you should not place too much weight on the fact that someone was referred to you. You should still interview the person thoroughly before allowing them to become your insurance representative.
This is a good place to mention a caveat. The intent of this book is not to provide a summary of a few steps that will allow you to purchase the very best insurance coverage for the least amount of money. That objective is impossible because there are too many variables at play. Situations vary from individual to individual and from business to business. Therefore, what might be best for one person’s situation is not best for someone else’s.
Also, understand that insurance coverages can vary considerably from insurance company to insurance company. Something as seemingly simple as “property coverage” encompasses nearly infinite differences between carriers. I have spent my entire professional career learning about coverage differences and it is simply not possible to share my knowledge about insurance policy coverages in a few sentences.
This said, there definitely are things that you can do to obtain better insurance policy pricing and improved coverages for yourself. Understand though that this will require some work on your part. One way to look at this is you may be able to save $500 by spending five hours working on your insurance program. That equates to $100 per hour for your time. Not too bad of a monetary return on time invested. The other benefit of going through the process is that you will learn new things about insurance. And more knowledge is a very good thing.
Here are specific steps that you can take to reduce the amount of money that you pay for insurance:
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1. Prepare a summary of insurance coverages and limits of insurance that you desire for each type of insurance policy you wish to purchase.
For instance, if you want to obtain competitive homeowner policy quotes, develop a spreadsheet template that includes the following coverages and limits of insurance:
* Coverage A (Dwelling)
* Coverage B (Other Structures)
* Coverage C (Personal Property)
* Coverage D (Loss of Use)
* Coverage E (Section II Liability)
* Coverage F (Medical Payments)
* Other Coverages Desired (i.e., Flood Insurance, Sewer Backup, Inland Marine, etc.)
A good starting place is to look at your current insurance policy to review your existing coverages and limits.
2. Contact several different insurance agents who represent different insurance companies. Include direct writers and independent insurance agencies and get quotes from several different insurance companies.
3. After receiving insurance proposals it is time to begin evaluating which insurance agents and insurance companies seem likely to provide you with the best policy.
By now you will start to feel which insurance agency and company may best suit your situation. Things such as your initial interaction with the insurance agency, their customer service and turn-around time and pricing received all play a part in your ultimate choice. Additionally, you may want to interview the agent you will be working with in the future.
Some questions to ask a prospective insurance agent include:
* How many years have you been a licensed agent or consultant?
* What do you consider to be your “specialty” (strongest area) and why?
* What can you offer me that other agents cannot?
* Who writes your personal insurance coverage? Many of the best agents have others write their own coverages in order to have a second set of eyes review their policies, as well as to have someone else to sue if improper coverages are written.
* How important is continuing education to you? What is the last class you took?
* What is your opinion concerning the future of the insurance industry? Give a brief description of what you feel it will look like two years from now.
* If I do business with you, who will be handling my account— you, one of your customer service representatives or someone else in your office?
* What can I expect from you in the future? How often will you review my account? What is your renewal process?
* What types of services can you provide besides selling insurance policies?
* Provide the names and phone numbers of ten of your most satisfied clients.
* What is the best method to communicate with you—email, telephone, fax, or other?
* Which insurance companies do you represent, and what are their “A.M. Best’s” ratings?
* What are the top five insurance companies you represent based upon premium volume?
* How well does the company you are proposing to write my insurance handle claims? What is their claims reputation? Are they “slow payers” or “tough payers?”
4. Next, enter all information received into your spreadsheet. At this point you can begin excluding insurance companies, narrowing your choice down to two or three insurance companies and the agencies that represent them.
5. Dig deeper into the coverages provided.
* Ask the insurance agent you may be choosing to explain coverages that were quoted.
* Ask what differences exist between their insurance quote and what other insurance companies are offering.
* Ask the insurance agent to identify significant coverage limitations and exclusions that reduce or eliminate coverages.
6. Choose an insurance agent and insurance company.
7. After you receive your insurance policies, review them to make certain that what you ordered has been delivered.
You wouldn’t believe how many errors I have found over the years when reviewing delivered insurance policies. By law in most states, you have a duty to read your insurance policies. This doesn’t mean that you must have a strong understanding concerning all of the insurance policy language. It means that you need to have a level of understanding of your policy that a reasonable person in your same circumstances and with similar educational and career background would have.
Now that you know how to improve your insurance coverages and insurance policy pricing, the question remains: Will you follow through on taking these steps?
Based upon my experience more people will answer “no” than will answer “yes.” Why? Most people don’t want to invest the time necessary to obtain a positive outcome. Others just don’t “like” insurance and would rather ignore coverages and pricing contained in their current insurance policies.
Since you have purchased this book you are more likely than the general public to give attention to your insurance policies. However, even you may feel uncomfortable with the technical aspects of insurance coverage or may not desire to spend a great deal of personal time on improving your current insurance situation.
Based upon direct feedback from clients, I can attest that insurance consultants play the role of “the great equalizer” in the insurance purchasing process. Fee-only consultants do not represent any insurance companies and work entirely on behalf of their clients. There is no dual fiduciary responsibility conflict since consultants have not signed contracts with any insurance companies.
Insurance consultants are free to recommend any insurance company that will do the best job for your specific needs. Some of the benefits realized by personal insurance and business insurance consumers when using a consultant include:
specialized knowledgeability to obtain broader coveragesability to obtain lower prices time savings for clientimpartial second opinion of current insurance program, including agent and insurance company effectiveness
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