John and Mary had been with their insurance agent for over 20 years:
· the only time they ever spoke with their agent was when they bought a new car or their children left home and got married;
· they didn’t even receive a Christmas card; and
· certainly the idea of an annual review was something they didn’t realize happened with other agents.
Luckily for them they never had a major claim. They paid their insurance premiums on time and thought all was well.
Their agent did not know that Mary had started a home based business, John had inherited a couple pieces of valuable jewelry, and they had built on a nice addition to their home.
Do they have a good or bad insurance agent?
How well do you think they are protected?
Now let’s compare John and Mary’s situation to Bob and Sue’s:
· their agent sends them interesting newsletters every month and shares pictures and stories of his family;
· he/she even prints vacation pictures sent in by other clients;
· every month he/she reminds them of the types of things they should be protecting;
· he/she gives them business tips;
· he/she even has a fun referral program and picks a winner each month; and
· once a year he/she does an annual review to make sure their situation has not changed.
What do you think the chances are that Bob and Sue are better protected than John and Mary? Do you see any difference in these two agents? What if John and Mary had bought into advertising Flo’s line, bought their auto and homeowner insurance from them. What about the business? The jewelry? The addition to the house?
So who rides in on the white horse to save the day if John and Mary’s house is broken into and the jewelry stolen?
The insurance agents, of course! They are the “face” of the company, the people you will most likely deal with 99 percent of the time. Insurance agents handle all varieties of policies and clients. They are the ones who do the patient explaining, answer the basic questions, and calm the clients’ fears. They are also the ones who can customize policies to meet all your needs. And that is worth a white horse and shining armor right there!
So ponder this for a moment. What is the difference between an insurance company, an online insurance agent, and a local insurance agent?
No, this isn’t the first line of a bad joke. (“An insurance company, an online agent, and a local insurance agent walk into a bar…”)
There are three major players in this business:
1. The insurance company consists of the people with the money who write the policies to cover your risks and charge you the premiums. At the end of the day, this is who cuts the check, should you have a claim. There are big companies and smaller companies. They all have a scorecard (rating) for their services and claims handling. Some work with local agents. Some work with online agents.
2. The online agent/companies are growing every day and spend millions of advertising dollars to get you to place your insurance dollars with them—thereby cutting out the local insurance agent. If you have ever had a claim, you already know the downside to this: there is no friendly agent who you know and trust on the other end of the voice mail nightmare. You can easily find yourself on the side of the road after an accident, dialing an 800 number and pushing 0 six times trying to get an actual human being on the line to talk to. Worse, sometimes the “human” coverage of those lines is not 24/7.
That is when you see the difference between a cyber-agent and a real one.
Geckos might be cute, and we know at least one that comes across as rather dapper on TV—but he does not know you personally, and he certainly will not show up at your accident site.
It is worth noting that companies like Allstate do a lot of advertising also, but still have a network of local agents to handle your policies and claims.
3. Finally, your local insurance agents are the guys (or gals) who live and work in your community and are just a phone call away. There are two kinds of agents: independent and captive. I will review the differences in just a few minutes, but know that your local agent should be focused on getting you the best protection. It sure beats the do-it-yourself option of trying to figure out everything and making decisions without the guidance of a true professional.
Not a Surprising Secret: Pick the wrong agent and your protection can have as many holes as a block of Swiss cheese.
In short, insurance agents are the best friends you can have in the insurance world. They put in the time and effort to make sure you are happy with your policy and all is right in your world. And something people forget when they are focused on saving money: the added service of an agent is free to you. Insurance companies pay agents instead of paying for advertising with the online providers…so it is no strain on your budget to
take advantage of an agent.
Hopefully by now I have convinced you all agents are not created equal.
And the online agent will probably cause you to have the least protection possible.
But what about the insurance companies—should you pick an agent based on who they represent?
You guessed it. Not all insurance companies are created equal either
Insurance is big business—but with the recent massive natural disasters, it is getting tougher and tougher on the industry, so they look for reasons to disqualify you, or at least to spike up your premium rates. There is that heartless, cold bit again! Why would they do that?
They have their reasons.
The average insurance company, to put it bluntly, has been burned before; they are like a brokenhearted lover who is afraid to trust again. But the good news is that the more responsibility you show—the more capable you appear to be in handling your life—the better the insurance company will “like” you.
That said, I do have to caution against putting on your rose-colored glasses too soon; not every insurance company just wants to help people. In fact, I would be lying if I told you that there was no such thing as a bad insurance company.
Great! Just what you need—to not only have insurance companies examining you as if you are a specimen under a microscope…but now you have to worry about their possible motives, too? What is up with that?
Do not panic. Yeah, it is not a great situation to have to try to “read between the lines” when you are being courted/pitched by an insurance provider. Fortunately, you have this book—and me—to help you make sense of the mess!
So Where Do You Start?
Always start with the agent first. There are a lot of great companies out there you may never have heard of because they do not do the massive advertising. Instead, they focus on providing great service and quick claim checks. In the end…you want your agent to answer the phone and work on your behalf if you have a claim.
Here is a list of t
hings you should be looking for in your agent
1. The agent has been in business for a number of years and is a “seasoned” professional.
2. They send out monthly or quarterly newsletters to stay in touch and keep you informed on the latest about insurance.
3. They do an annual insurance review with you to make sure you are adequately protected.
4. They have many client testimonials they are happy to provide.
5. They are a good listener and ask great questions.
6. They answer any question promptly by email or by phone.
7. They know about all the discounts and makes sure you are getting the best price possible.
8. They represent several insurance companies and can take care of all your insurance needs.
9. They are properly licensed and do not have a track record of complaints.
10. They are always looking for gaps in your protection.
Independent vs. Captive Agents
This is a simple question: Do you want an agent who works:
· for you (independent agent); or
· for just one company and can only place policies with that company (captive agent).
A great question to ask a potential agent is if they have ever been a captive agent in the past. You will find many independent agents started down that road, but changed at some point in their career. There are several reasons. One might be to give better options to their clients.
No one company is the best at everything. If an agent only handles one insurance company, you may not be getting the best coverage at the best price.
And if all you go to is a captive agent, you will never know.
Now here is where it gets very sticky—some agents may appear to be “independent” when, in reality, they are only authorized to deal with multiple affiliates of the same company. Therefore, while it seems as if this agent is “independent,” in actuality, he or she is doing the bidding of one carrier.
So why aren’t all agents independent?
It all boils down to security.
Large insurance companies (like State Farm and Allstate) pay agents for that exclusive relationship. They may give the agent a stipend every month to pay for office expenses and their own insurance.
But the number of captive agents is declining.
Despite the exclusive arrangements and the business that can come from those arrangements, the flip side of the “captive agent” coin is, it is not all rainbows and roses for their carriers, either.
For instance, not all carriers are thrilled about paying the expenses of captive insurance agents—especially in areas where they are not looking for growth, such as coastal parts of the country. Thus, as of late, it is becoming increasingly more common for insurance companies to “set their captives free,” so to speak. They “dump” their captive agents and take their chances on non-captive agents bringing in business—or perhaps just do more marketing on their own.
Yes, it hurts when the captive agent losses their contract with the big insurance company.
However, many of them walk away from the contracts themselves.
So what is in the other pasture, where the grass looks greener?
This is where agents who do not want the restrictions of one company hang out, where the non-captive agents live. These agents compete not only against fellow independents, but against insurance companies and their captives.
They have the strong consumer advantage of giving you optimum choice; they represent multiple insurance companies and have no specific allegiance. They make their money taking care of you…not any particular insurance company.
There is no easy answer
In the abstract, this sounds like a clear choice; go with an independent agent. However, it is not quite that simple; the fact is not all non-captive agents are necessarily completely independent.
(Confused? Yep. I thought so.)
Like everything in life, there is not always a clear cut answer. You should always interview the insurance agent. Find out
· how long they have been in business;
· how many companies they represent;
· if they can handle all your insurance needs (including your business);
· what happens if a claim needs to be filed (do you get a live person on the phone at any time of the day);
· if they are up-to-date with technology? Or do they still have filing cabinets full of paper?
· how are you treated on the phone?
In the next chapter, I will talk more about the insurance companies themselves.