Canadian Underwriter

Changing the price conversation

November 3, 2010   by Terri Goveia

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The promise is everywhere: online and print ads guarantee the lowest insurance prices in town. With many rates going up, and consumers still feeling squeezed by the recession, how can brokers get clients to look beyond price?

There’s a fine line between an insurance bargain and insufficient coverage, according to the Insurance Information Institute (III). The New York-based industry group highlights common pitfalls of the popular “cheaper is better”consumer mindset in a recent bulletin.

Among common mistakes: choosing an insurer by price alone, forgoing key coverage and opting for the lowest required amount of liability insurance for a vehicle.

Going for the cheapest coverage can leave a policyholder with the wrong–or inadequate–coverage, notes Jeanne Salvatore, the institute’s senior vice president in the October 28 bulletin. “When money is tight, it is extremely important to be financially protected against a catastrophe with the right amount and type of insurance,” she says. “By taking a few simple steps, it is possible to cut costs and still be protected should disaster strike.”

Changing the conversation

One way to address the cost bias is to centre the conversation around “fair” pricing, rather than the cheapest price, says Bob Lawrie, vice president of Dan Lawrie Insurance Brokers Ltd. in Hamilton, Ontario. That involves finding out what’s important to the client, and then changing their view on what those things are worth, he says.

“It’s easy to say, ‘what kind of car do you drive?'” he points out. But adding an educational component to a discussion on premiums can help them understand why one company is more expensive than another, and what their policy includes that’s worth paying for, he says.

The III also recommends highlighting an insurer’s financial stability and claims service track record.

The value alternative

Another approach: offering them alternatives, like different deductibles, on their insurance program design. Those types of conversations move a broker beyond “order taker” status, and solidify the value of a one-on-one relationship.

“People are so conditioned to find the cheap price,” Lawrie says, but points out that creating value for them–especially in the wake of Ontario auto insurance reforms–and taking time to explain that value will net clients the right policy and a good broker-client relationship.

“They want a fair price and a trusted advisor. They know we’ll be there when [the need for] service comes around,” he says. “We owe it to clients to find more than just a cheap price…if you’re an order taker, that doesn’t build a client, that builds a short-term relationship.”

This story was originally published by Canadian Insurance Top Broker.