Avoiding the "apples-to-apples" trap

Create high-percentage closing opportunities

A common practice among commercial accounts that put their insurance out to bid periodically is to prepare a set of insurance specifications and invite several agents to bid based on those specs. While this is probably a logical approach from the prospect's point of view, it is a virtual no-win situation for those agents who are bidding on the insurance. There are ways, however, that you can turn this situation to your own advantage, if you're the agent quoting on the account.

The best thing you can do, of course, is to avoid the trap entirely. Some experts firmly advise against doing the proposal (quote) until you've established a relationship, and you've gotten a commitment that you'll get the business if you do a better job than the incumbent agent. This makes good sense if you're in a situation where you can establish the relationship first. In my last agency, however, our commercial lines producers were going on appointments that were set up by telemarketers, and we didn't have any relationship when we walked through the prospect's front door. We faced the apples-to-apples trap every day.

The scenario probably sounds familiar. You or your producer show up for the appointment. If you or your telemarketer set up the appointment properly, you meet with the small business owner, the CFO, the risk manager, or whoever is responsible for buying insurance. "Look," he says, after getting you a cup of coffee, "we don't want to spin your wheels, and frankly we don't want to waste our time either. Therefore, we're getting three bids, in addition to the one from our current broker. Since we don't really understand insurance, we're asking everyone to quote based on the same specifications, so we can compare the quotes-apples-to-apples. We'll make a decision, based on those quotes, to either stay with our current guy or go with one of you."

It certainly sounds fair. But it's a trap, and it virtually guarantees that the account is going to stay with the current agent or broker. Here's why it's a trap. Unless someone really messes up, all the quotes should come in reasonably close to each other. Oh, they'll be higher than last year in a hard market, and lower than last year in a soft market, but insurance is a highly competitive marketplace, and the prices should all be about the same. Insurance is also a necessary evil. Commercial accounts don't buy insurance because they want to; they buy it because it's a business necessity. At the end of the process, if all the prices are roughly the same, the businessperson is going to stick with an "evil" he knows (the current agent), rather than an unknown one (you, or the other people). In essence, the businessperson has used you to keep his or her current agent "honest."

OK, so you've walked into a trap. What do you do? Well, you could say "Sure" and work on the account, trying to fool yourself into believing that you have a live one here. Don't do that. Instead, follow these steps to turn the situation around. You'll probably eliminate all of the other agents working on the account, and you'll get a leg up on ousting the holding broker.

Step 1 is to treat the apples-to-- apples gambit for what it is, an objection. The objection is that the prospect doesn't know you, so of course he doesn't trust you, but he does trust his own ability to compare side-by-side quotes. Fine. As with any objection, you want to start by restating it, which confirms that you're listening to the prospect, hearing and understanding what he says. Agree to it, adding one little thing.

"I understand, Mr. Johnson," you agree. "I can certainly understand why you want to be able to compare coverages and quotes (actually, he asked only for quotes, but he probably won't catch that). In return, though, I'd like your permission to do one extra thing. If, in looking at your account and taking it to market, we find that there are ways to either lower your rates or improve your coverage, is it all right if we also include some of these suggestions (as extra items) in our proposal?" Even if his current agent is his brother-in-law, he is still going to say yes.

Step 2 is to do some information gathering. This is crucial. You wouldn't be comfortable walking into a doctor's office and having him treat you without his asking what your symptoms are. So I strongly recommend that you use an industry-- specific survey questionnaire. The Rough Notes Company has one, Risk Survey/Commercial, which supports 700-plus classes of businesses; and there are other products, as well. Or, you can build one yourself, which works well if you're a specialist. (If you're a generalist, go with a commercially available one.)

The whole point of the survey is to gather the necessary information. How can you make suggestions about coverage and limits unless you first know what the insured's exposures really are? They might be, and probably are, significantly different from those on the specifications sheet. So use the questionnaire to start building a relationship with your prospect. Spending time with the prospect, and getting him to talk about his business, is how you start a relationship. If you simply take the specs, thank him and leave, you might run into him at the mall or the movies that night, and he wouldn't know you from Adam. Why would you expect him to buy insurance from you if you haven't built a relationship with him?

Step 3 is the hardest, and the one that agents are traditionally least-trained for. You need to find all the flaws in the current insurance program and prepare a proposal that highlights those flaws. Sometimes it becomes obvious (from the survey questionnaire), if there are missing locations, underinsured values, etc. Such flaws are becoming less prevalent, though, as agents have become more professional over the years.

Many agents, though, miss big opportunities in the area of non-- money endorsements-which give you broader and better coverage to recommend while not raising the premiums. Preparing a proposal that highlights how you will improve all the things that the holding broker missed absolutely wipes out the other competing brokers. If you can show that the holding broker messed up, and other me-too's are saying (in effect) that they can mess up just as well (because they quoted apples-to-- apples), it always comes down to you against the current agent. And, believe it or not, you have the advantage. You get to pick apart his work, and he probably won't have the chance to do the same to you.

Step 4, presenting your proposal, is where the rubber meets the road. This is a sales presentation, in the purest sense of the word. You need to get a commitment to have the decision-- maker there, with an hour committed to going over your presentation. You want to control the environment, sitting at the extreme left (or right) end of the group, so you can see them all as you walk them through the one copy of the proposal that you've brought out, initially (otherwise, everyone will go to the last page, where the prices are, and the meeting is over). You'll need to explain why you're recommending a broader named insured, broader definitions of building, broader valuation clauses, and more. Personally, I love to recommend non-money changes, because it puts the current agent in an untenable position. If it makes the coverage broader and doesn't cost anything, why didn't the current agent do it? Even if he offers to do it in the future, all he's doing is confirming that he didn't do it in the past.

These are very straightforward steps, although there's a lot behind each one. Follow them, and you can turn the apples-to-apples trap into a high-percentage closing opportunity.

By G. Barry Klein, CPCU, CLU

The author

G. Barry Klein, CPCU, CLU, is a former insurance agent. One of his current projects is maintaining the industry reference site, www.ultimateinsurancelinks.com. He can be reached at barry@ barryklein.com.

Copyright Rough Notes Co., Inc. Oct 2002
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