As a commercial insurance underwriter with a background in retail insurance and marketing, my goal is to continue bringing value from that perspective.
So I started pondering on price, premium, and rate.
In this current environment of hardening renewal rates and aggressive new business pricing, carriers, agents and end clients are being pushed to do more with less.
What’s the value of one dollar vs. another dollar? For the dollars spent on a product or service, we all know the difference between a high quality product or service and low quality. High quality performs better, last longer and gets the job done right. In insurance, we are able to offer both product and service. It goes beyond the policy paper that coverage is placed on to claim service, risk control resources, and thinking outside the box to make the client’s dollar extend as far as possible.
You could say it’s all about bottom line premium, but is that really true? How many times have you sold on price only to lose the business in a few years to a better price? The old adage goes, “When you sell on price, you lose on price”. While you may need to be in the ballpark to compete, your value should be the tipping point. If you play the game correctly in the pre-qualification stage – uncovering coverage gaps, bringing new value to the client for long term bottom line savings – the premium at the end of day will be secondary to all else.
You could say the premium needs to be less to win, but is that truly the case? Premium is one factor only. You winning or losing depends on how well you know the clients desires, needs, issues, pains, concerns and what value you bring to solve all of the above. For some clients you will need to be $1 less to win the deal. But stop and ask yourself: is this really the kind of client that I want to build my agency around? If I am $1 more next renewal, will I lose the deal? If you do your homework and stay committed to high quality clients who value everything you bring to the deal, the 5%, 10% or 20% higher premiums next renewal is your margin for you, your agency and your family. It’s for all the hard work, value and trust built with a long term relationship client, and you can easily offset it with value to your client.
You could say rates need to be less per building, per auto, per employee, etc., but do they really? Cheap competitive rates are great, until the losses come. Take auto as an example. The market has been soft for a number of years, and here we are increasing rates drastically now. Property has the same story. CAT events are going to happen. No one is immune to Mother Nature. While there is a need be competitive as a carrier partner, there is also the need to be smart in pricing risks for a long term outlook.
Every policy year/renewal is different. Accounts are underwritten on a case-by-case basis and every underwriter is different. However, in my experience, when the rubber meets the road, the dust settles and when parties start ironing out the details of a loss, the first question asked is usually, “Is there coverage for that?”
The premium is long forgotten.
So the value of you as the agent and your carrier partners, not to mention the product itself, when it’s all said and done, will not be the premium paid on it, the rates negotiated for it – but rather the way the agent, carrier, and policy paper perform.
What you as an agent bring to the table is so unique that translating it into a premium amount is impossible. None of the following can be accurately measured that way:
- Your ability to uncover an unknown or unrealized exposure within the account and find proper coverage for it.
- Walking hand-in-hand with clients on putting safety programs together that help mitigate risk.
- Your skill in bringing carrier partners to the table on a hard-to-place risk.
- Properly conveying the risk to underwriting with all known information and details, and the best market to bring it to.
None of the above are related to premium, price, or rate. While being price competitive is one thing, it’s another thing entirely to be program competitive.
A competitive program starts and ends with value, and value begins with you.