National Underwriter - 02/01/14
By Mark Galante
Few issues are as important to high-net-worth individuals as finding a company that aligns its interests with its clients.
Insurance brokers have made strides to improve alignment over the past decade. There is greater transparency and a proven belief that aligning your interests with the interests of policyholders makes good business sense.The challenge for carriers may be harder. There is a perceived inherent conflict for P&C insurers to satisfy the desires of shareholders (increased profits) with the desires of policyholders (more service and lower prices).
Insurers such as Amica and Nationwide have taken their message on alignment of interests to the airwaves in well-funded advertising campaigns, knowing that consumers see value in this powerful message.
Brokers specializing in the high-net-worth segment can embrace alignment and work with their carriers to deliver even greater value. Here are just a few ways:
Best Clients Need Best Rates
You likely have seen cable or cell phone service providers offer discounted rates or other incentives to entice new users to join their networks. This and similar practices have moved Ally Bank to state that “even kids know that it’s not right to treat your new friends better than your old ones.” As a current customer, you may feel deceived by these marketing tactics, but you probably are not surprised because many consumers have low expectations from these providers. These categories of providers aren’t ones we associate with labels like “trusted advisor” and “fiduciary.”
These “new business writing companies” are routinely employed by some specialist insurers, creating the potential to alienate loyal policyholders if and when they realize that new customers with similar risk profiles are paying thousands of dollars less to insure their similar homes. A system that subsidizes new, untested business at the expense of responsible, long-term clients may attempt to preserve profits, but runs counter to the principles of alignment. Turning loyal policyholders into enthusiastic ambassadors is a far more effective way of growing a profitable insurance company.
Independent agents and brokers can work with carriers to stop these tactics and ensure that their loyal customers are offered the best available rates.
High-net-worth families are smart, sophisticated people. They want to know where their money is going, and that it is being used in their best interests. Here are three examples where wealthy and sophisticated consumers would benefit from greater transparency:
- Valuations. No issue creates more dissatisfaction among owners of high-value homes than replacement cost valuations. Because the appraisal process typically occurs after a policy is issued, there is a sense of “bait and switch.” This is a complicated subject, but listening to the feedback of policyholders (and engaging them in the process) not only eliminates “detractors” but creates “promoters.”
- Options. One of the great advantages of the independent producer is the ability to access multiple markets. Agents can earn greater trust if their market syndication processes are transparent and tailored to a client’s preferences.
- Compensation. Over the past decade, nearly every major broker has improved their disclosures for how it is compensated. You don’t need to reinvent the wheel here, but it would be wrong to think that consumers do not care.
Assist Clients to Prevent Losses
Nothing defines alignment in the high-net-worth space better than preventing or avoiding loss. The best advisors understand each client’s unique needs and then build a personalized plan to address them. Specialist carriers have teams of risk managers that help clients better protect their homes, families and “irreplaceables.” A proactive, personalized effort to help prevent losses can create greater customer satisfaction than a great response to a claim. That means doing research for clients, coordinating with contractors and setting appointments. Recognize the value that you and your firm can create for the client in the risk management process.
When the customer is at the center of one’s focus—and when interests between client and firm are aligned—there is ample evidence to suggest that insurers can actually grow faster and be more profitable. Particularly in the high-net-worth segment, consumers continue to become more informed and more demanding. The commitment to stronger alignment of interests is an advisable step for all who seek to serve this niche.
Mark Galante is the chief marketing officer with the PURE Group of Insurance Cos. Contact him at firstname.lastname@example.org.