Archive

Archive for the ‘Selling Your Insurance Agency’ Category

More on the Economy

A Definition of “Commodities”. Is Insurance a “Commodity” (2)

This discussion of Commodities centers around recent attempts by insurers to circumvent agents and sell insurance products over the internet.    I am convinced that insurance is not a commodity as it is not a product that can be sold in an unmodified state and be used properly.   It would be like purchasing an unassembled, complicated piece of equipment and having no directions for assembly.  It appears to me that is the case with “unbundled” “risk bearing” or to put it another way, the thing Insurance companies sell is a “risk finance” mechanism.    Agents add value to this product by showing purchasers how to use it and by adding their own body of knowledge to the process!

______________________________________________________________

To decide if insurance is a commodity, it is necessary to determine the definition of a “Commodity”.

Source:   Black’s Law Dictionary:

“Commodities”

“Those things that are useful or serviceable, particularly articles of merchandise movable in trade.

Goods, wares, and merchandise of any kind; movables; articles of trade or commerce.  Movable articles of value; things that are bought and sold.   This word is a broader term than merchandise, and, in referring to commerce may include almost any article of of movable or personal property.

Staples such as wool, cotton, etc. which are traded on a Commodity Exchange and on which there is a trading in futures.”

Blacks Law Dictionary end of definition.

My beginning comments to this discussion:

“Rick Bearing” or “Risk Finance” may possibly meet the definition of a Commodity.   But that commodity product is has little value unless accompanied by knowledge of risk management.   Thus, insurance without advice is a recipe for post loss disaster.  Our “value” or “power”, as an insurance agent, rests in the asymmetry of knowledge between the client and the agent.

There will be more to follow this post, but we need to realize the reason we exist is that there are certain things a client does not know about how to USE insurance that WE DO know.

The raw product of risk finance may be “somewhat” of a commodity.   “Risk Bearing” or “Risk Finance” as a product may be able to be traded on a futures exchange (like commodities), but the added value of the “body of knowledge” of risk management” and the “body of knowledge of risk finance” as a “tool” of risk management is the added value a quality insurance agent, broker or consultant brings to the table.

This reminds me of what I have discussed with many of my consulting clients:

“What you know, likely won’t hurt you”

“What you don’t know, likely won’t hurt you, if you know you don’t know it.”

“What you don’t know, and you don’t know you don’t know, will hurt you every time!”

So our Value to our clients lies in what know that our client does not know… The “asymmetry” (our knowledge of risk management v. our clients’ lack of knowledge of risk management) is our value to the client.

We will discuss this “commodity” mentality more extensively in the next few days…

Howard Candage, CPCU, CIC, CRM

 

Selling Your Insurance Agency

Selling your Insurance Agency is as complicated as purchasing complex casualty coverage for a large Insured.  Trying to do it on your own is a mistake..   Why?    Because a sophisticated buyer can pick your pocket for more than my fee and you won’t even know it’s gone!

My HORROR at the Selling your Agency Paradigm…

I recently went to a trade show where we were an exhibitor. The booth across from us was an internet company that does internet marketing. I inquired if they did work with all kinds of companies or just insurance agencies. They answered they work exclusively with insurance agents. He asked what I do and I told him I help people buy and sell insurance agencies. He said, “Oh yeah… Our agents approach other agents all the time and we show them how we are set up on the internet and then we scare the daylights out of them and beat their price right down and our guy buys ’em. Then we put them on our platform and our agent can either flip it and make a lot of money or can keep it and make a lot of money that way.” I was HORRIFIED!… So many agents sell for so much less than they should as they are unwilling to get objective advice. Agents just do not understand that there are really people out there like this! BEWARE!

MAIA Big Event

Please visit us at The Big Event!   The Massachusetts Association of Insurance Agents Trade Show.    Booth Number 18 Leave a Business Card for a Chance to win a Borders Gift Certificate!