Our insurance columnist, Dave Goodwin, has over 40 years of experience as an agent, agency owner and journalist. He is an insurance marketing consultant and a litigation support consultant. Born in New York, he now lives in Florida.
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ARE POLICIES WRITTEN IN GIBBERISH? “Everything that can be invented has been invented.” Charles H. Duell, Commissioner, U.S. Office of Patents, 1899 The quotation above is a classic in showing how someone with high credentials can be profoundly wrong and harmful. Imagine how your life would be if the U.S. Patent Office had actually closed, as suggested, in 1899. If insurance is important -- and I hope we agree that it can be not only important but also critical --- then certainly it follows that the source of your insurance advice is also critically important. Have you thought about where you get your insurance advice? Some folks get insurance advice from unknown or unnamed sources on the internet, or in the mail. That may be the easiest or the cheapest (or not!), but it’s often not the best because many things are lacking there which are best addressed by a person near you or close by. Insurance is personal. Others get insurance from a person, perhaps someone met casually or socially, and --- so some thinking goes --since all insurance is just about the same, it might as
well be this person. Well, this may be a step better than an impersonal computer or mailbox and with luck it could work well, but it still leaves too much to luck. (And of course all insurance is not the same. Not at all!) Next we come to those who get insurance from someone recommended or referred, or who has impressive credentials. Much better, possibly adequate, but there are still other considerations. As one who consults to agencies and companies on whom to engage as insurance professionals, I’ll share one of my secrets with you: I try to get into the candidate’s head. One way (and you can do it, too): I’ll ask where he (or she) gets his professional information. Which publications --- print, electronic, audio, whatever -- does he rely on? Which seminars, courses webinars and meetings does he attend? (Mandatory continuing education courses also count, but not too much.) Which industry-sponsored events teach him? How does he keep up with current events and products in the profession? How does he learn what the competition is doing? Key question: Is he equipped to help you make informed decisions? Then a seemingly simple but complex question: What business are you in? Many
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respond: “Life and health insurance.” Or “property/casualty insurance.” Or “financial advisor.” In years past, those answers may have sufficed but I feel that a rounded insurance professional now sees herself as being in a segment of the financial services business. Why? Because while it’s perfectly understandable for someone to specialize in L/H or P/C --each in itself is a very broad field with many subspecialties --- it’s important for the big picture to be understood by your source of advice. The big picture includes, for openers, how your needs can best be met by knowing which blended products to consider. A blended product crosses narrow lines, usually offering broader coverage for less premium. It may, for example, combine your auto with your homeowner’s policy and relate to the life insurance covering your mortgage obligations. Or it may tie your life insurance needs to a health product such as Long Term Care. Or an annuity may offer you a chance to increase benefits when a stock or bond market index rises, without the risk of losing benefits when that index drops. Or it may blend a P/C product with a L/H product. There are numerous other examples, some of them described here in previous columns. The point is
that even though an agent or broker or risk manager or consultant --- the kinds of source I usually recommend for insurance advice --- may have profound expertise in one of the categories of insurance, I feel that to serve you best he should be aware of how his advice blends with the other elements of your financial picture. He needn’t have expertise in all the other areas --- probably won’t --- but he should see that his advice doesn’t ignore the areas he doesn’t address. It’s like the orthopod who treats a broken leg but doesn’t ignore the patient’s heart condition. In practice, this often means that your P/C agent or broker will have an associate competent in life, health and related forms of insurance, and that between them your investments --- or lack of them --- will be addressed (perhaps by a financial advisor). It may also mean that your attorney or accountant, seeing a need, refers an insurance agent. A true example: A mortgage broker specializing in commercial properties started wondering why he couldn’t serve his clients and himself better by offering the property/casualty insurance to his mortgage clients. Not knowing insurance, he engaged a P/C agent and set up a P/C agency which in a short time saw
the obvious opportunity to sell life and health insurance to their clients. So they engaged some life agents who in turn saw great opportunities in handling mutual funds and other investments. So they engaged some financial advisors who saw opportunities in completing tax returns for their clients, and those folks saw opportunities in selling travel services to their clients. So they... well, you can see where this is going. This was not the end. It’s a huge firm. As profit centers, each of the specialties gains from the relationships of the other specialties, and each in turn helps support the others. Most importantly, each client benefits from the leverage and the broad-based relationship he enjoys with the umbrella firm. Now I’m not suggesting that you seek out your insurance agent when you want to buy a bus ticket to Oshkosh. Most agents don’t sell travel --- and rightly so, probably. But I am suggesting --- strongly --that you and your insurance agent(s) are better served when you all recognize that at least the basics ---life/ health and property/casualty --- are closely tied, even though they are different. That’s the minimum in basics nowadays. And that’s part of the reason I ask agents “What
business are you in?” It shows how broad or how narrow their scope and vision are. So now we return to your question: Who provides your insurance advice? How broad or how narrow is your provider? You can also ask revealing questions. “Can you handle all of my insurance needs? If not, do you have an associate who can help?” “In dealing with your special area of insurance (L/ H or P/C) , what are your limits in what you can advise or sell?” Expect reasonable limits, of course. An agent or agency represents, and has influence with, only a certain number of insurers. It may be as low as one --- a socalled captive agent. Or many: an independent agent. Or a combination of both. Each may have strengths and weaknesses. Generally, if all other things are equal, I feel that independent agencies are better equipped, but there are exceptions. As to the limits of training, education and experience of each agent, that’s another chapter. Copyright Dave Goodwin 2011