A family member recently bought a house. His realtor was connected to an agency of which I am familiar. In my opinion, the agency should not possess an insurance license. Incompetent would be the nicest description I would offer. Uncaring about the applicability of what was being sold would be the second description I would use. Bordering on unethical might be slightly too strong. This was all evident in the quote provided to my relative and confirmed by my knowledge of that agency.
Was the agency just doing their job quoting a policy? The homebuyer asked for a quote and they gave him one. One quote is as good as another, right? They took his order and thus they fulfilled their job as an order taker.
Is their job to take orders without asking any questions from a customer who has no idea what coverages they need for such a critical financial product as homeowners insurance? Is the agent’s job to simply provide a quote without any attempt to discern the client’s coverage needs other than, “What is your mortgage amount?” That is about the only coverage need analysis the agency performed.
I saw a commercial quote this morning that did not even list the coverages provided by the quote! Did the agent provide a quote? Yes. Did the client ask for anything but a quote? No. Did the agent do their job? Or is the agent’s job to match coverage needs to the policy being sold?
A huge proportion of agents and carriers care only about generating $X sales. I recently learned of a large insurance entity that has chosen not to offer any coverage education to its agents, perhaps not even its underwriters. It is just about $X sales. Many insurtechs and carriers have built innovative marketing platforms that make consumers feel empowered to make insurance decisions. This is a false premise, however, because how can a person who knows nothing about their actual insurance needs make the right decisions? I can hear the politically correct raging that of course consumers can make their own decisions. I have been educating agents for 30-plus years and even most agents do not appreciate how important it is to sell homeowners full assessment and ordinance coverages. There is no way that most consumers would know how important these coverages are, and therefore, cannot make the right coverage decisions.
The marketing programs “empowering” consumers to make bad decisions is great psychological marketing. Is it the agent’s job to help consumers understand what coverages they really need?
Here is an analogy. A business needs a new buy/sell contract. Let’s ask an attorney to sell us a contract. In fact, let’s ask the attorney to offer five different contracts for sale, all for different prices. The variances between the contracts are material. The attorney asks no questions regarding the purpose of the business’ needs or how the business is constructed or how many partners exist or any questions whatsoever other than, “How many contracts do you want to consider?”
Furthermore, because legal contracts are mind numbingly boring, most people do not read their contracts in detail. I once advised an agency owner who had signed contracts with his producers that gave each producer a 33% ownership in the agency, however, he had five producers.
Do the math. He never read the contracts.
Insurance policies are legal contracts and insureds never read their contracts. When you offer five quotes, you are offering five legal contracts. If you have not read them and are not familiar with them, and the insured has not read them (not to mention that just about 99.9999% of people don’t read the forms prior to making their decision), no one involved has any idea whether the legal contract being sold is appropriate. Who would buy any other legal contract in this manner?
Is this any way whatsoever to buy, or even sell, legal services? Yet this is what that agent did when offering a policy to my relative.
Therefore, is an agent’s job to sell a legal contract without knowing what is in it or without asking anything but cursory questions like, “How much is your mortgage?” (For those of you who know what they are doing, you will recognize this is not even the key question relative to Coverage A limits.) A whole lot of people in this industry, including quite a few E&O instructors, E&O defense attorneys, and association people, feel agents’ duties end right there.
I will explain the policy in more detail. There is an insurance concept for determining whether coverage is provided known as the “Four-Corners” test.
According to IRMI, the “Four-Corners” test is “the legal principle that an insurer owes a duty of defense to its insured if the formal allegations of a claim or suit match the literal provisions of the insurance policy, regardless of any differing or contradictory facts known or knowable to the insurer.” The policy offered to my relative cut so many corners, there were no corners left. The paper was a circle. Additionally, the carrier was on watch for a downgrade from A.M. Best. I research carriers in depth. My personal opinion is that Best was being kind.
The Agent’s Job
What is an agent’s job? Is an agent’s job to sell insurance with any company no matter how poor the coverages and the stability of the carrier without any notice of either shortcoming to the insured? Or is the agent’s job to fulfill the point of insurance, which is to protect the client’s assets? A corner cutting policy underwritten by a carrier with wavering financials sold by a large agency with minimally trained staff does not seem like a promising model for providing adequate client asset protection. Yet most consumers would not have had a clue. My relative was lucky he had me review the situation.
Another example involved an even more questionable carrier (that regulators forced action upon shortly thereafter) that offered homeowners policies at a cost of about 40% less than the competition. The carrier was desperate to add new premium in other geographic areas by playing the traditional carrier game of adding lots of new premium quickly, and pretending that even at a 40% discount it would be profitable by offsetting the losses elsewhere, and then praying to outrun the tail. Most consumers will jump at a 40% savings and they will not do any research.
Fortunately, my relative called me before buying a policy that would have been of questionable value when, within a couple of months, the regulators stepped into the picture. The agent was either ignorant, stupid, or unethical. Did they do their job offering the “best priced quote”?
If the agent’s job is to sell insurance, any insurance, pick your contract from under any one of the five plastic cups, then as an agent, you are not working for your clients.
You are working for the carrier and/or for other purely selfish purposes. I am not declaring that these motivations are wrong but don’t be a hypocrite by pretending you work for the client.
And then — in these cases — why should anyone trust you?
If you are honestly working to protect your clients’ assets, the process and road to success is straight and clear. Talk to your clients and learn what their exposures are. Learn what exposures they have in their HOA agreement. Learn what assets they need to protect. Learn about all their toys. For commercial clients, learn in depth their business interruption exposures and needs (Actual Loss Sustained is not the uniform solution so many people believe it is). Know your carriers and their forms. Guide clients to match the coverages to their exposures. It is not rocket science. It is simply doing the right thing for your community.
If all a client really wants is an ID card, cheap and insufficient insurance might be the solution. But most people do want the right coverage. They do not know enough to know how to talk about their needs because no agent has ever taken enough interest in them. Take the time and match the solution to the need.
This model beats the AI technology-based solution promising to sell clients coverage at the most opportune moment based on their algorithms. It bests the hucksters. And you go to bed knowing you are doing what is right.
What is your job?