A View From The Press Box

Bob Hunter has a point, but should agents be required to disclose they don't have access to every insurance product out there? Seems like overkill. If consumers seek out quotes from three or four sources, the marketplace will encourage agents to do the right thing and offer the best product at the best price.

Consumer groups and insurance departments need to do a better job of educating consumers how to shop for insurance. This problem then takes care of itself.

A bigger concern is the growing number of agents who are getting caught stealing premium and selling bogus policies, but that's an issue for another day.

Dennis Jay
Coalition Against Insurance Fraud

A couple of statements in your post jump out at me:

* Mr. Hunter said, "Agents never explain to their clients that they are tied to a finite number of companies..." How does he know this? If a potential customer specifically asks about Company Y and the agent doesn't represent Company Y, don't you think the agent would have to admit that? Or might he or she not say, "This is the best quote I got from the companies we have"?

* If I'm an agent for companies X, Y & Z, how am I supposed to know whether company W is the best fit or not? Company W certainly hasn't given me their rates. I don't have direct experience with their claim service. Chances are, I don't have copies of their policy forms. If I represent a finite number of companies, I have thorough knowledge only of those companies; I don't have it of every company.

* Any vendor of any product or service will offer a limited range of choices within a given universe of available products. I don't see Apple computers in Circuit City, for example. That doesn't mean I can't seek out an Apple reseller if I really want an Apple computer. Between the Internet and the Yellow Pages, there are plenty of ways for consumers to shop for insurance. Judging from the continuing soft market for auto insurance, I'd say they're doing just that.

Tim Dodge, AU, ARM, CPCU
Director of Research & External Communications
Independent Insurance Agents & Brokers of New York, Inc.

As an independent businessman, my job is to offer the best product that I have to sell for any particular situation. It is NOT to act as an UNPAID insurance consultant. Unless, of course, Mr Hunter chooses to fund my lifestyle for my noble efforts.

Until it changes, American business is still capitalistic. That is, people start a business to make money. And, unless you are disreputable or a politician, the only way you can do well for yourself, is to do well for your clients/customers.

How is the Consumer Federation of America funded? Shouldn't that be disclosed every time Mr Hunter makes a grand pronouncement? Did he have such a bad experience with an insurance agent/broker that he must continually paint all of us with that same brush?

Not all independent retail stores sell every available product there is to sell. It is unrealistic to think that all independent insurance agencies can possibly represent every company within their licensing jurisdiction.

Contrary to the CFA's insinutations, most agents are honest business people who do the best they can for their clients/customers. To do any less is unethical and bad business.

In many states, if not most, the agent is not in a fiduciary relationship to a customer. So what would be the basis for an agent to tell someone to go somewhere else?

Outside of Miracle on 34th Street, would most any business do so?

Is a specific policy cheaper than one offered by an agent? Maybe. Is there better service from any agency or carrier than the customer can obtain from another agency or carrier? Possibly.

Is that better service, claims perspective, ease of doing business for the customer a factor outside the pricing issue? How does an agent explain that intangible to a customer?

I'm not sure what Mr. Hunter's point is. The agent presumably wants to attract and keep customers, thus is motivated to give good service with a quality company.

It is true that many existing and certainly prospective customers calling for a quote judge the ability of an agent simply on price.

I also know, however, that agents choose what company they will represent based on many other factors. Most agents want to keep their clients through many renewal cycles. Thus they will choose companies to represent that will handle a claim effectively, are financially sound, will offer tools to make the agent more efficient, are flexible in underwriting and pricing one-off situations and, alas, will help keep the agency E&O insurer happy.

As you are standing in your front yard in your jammies in the dead of winter with the smoldering ruin of your former home steaming behind you, is the price you paid or the company choice your agent made the most important thing you are thinking about? Didn't think so.

Not too many personal lines companies accept brokerage business, so even that avenue is limited.

Again, what's his point?

I do not think that you are giving the consumer enough credit in their buying decision.

We explain to our prospects that these are the markets we represent. I cannot tell you how many times I have sent people to another agency when I do not have a product that fits their needs.

Mr. Hunter's comments on sending someone to another agency with a better price indicates that price and price alone should be the driving factor in the insurance buying decision. I do not agree that price is the sole factor in a "proper" buying decision.

When I go to buy tires or a TV, do I think the dealer represents all possible markets? NO!!

I look for knowledge of the product and service by the dealer along with price.

We need to get beyond the fiction that insurance agents, brokers or producers by whatever name "represent" anyone but themselves.

They are in business to collect commissions, contingent or otherwise, and not to serve anybody else's interests.

The only things that make them serve somebody else's interests to some extent are competiton for clients and competition for markets, neither of which is an inexhaustible resource.

These twin competitions force them to steer some middle ground in using their knowledge and resources to keep some kind of balance among the three interests.

Buyers, too, need to look out for their interests, by actually creating competition for their business, by becoming educated about the business of insurance, and by using at least two agents/brokers on every quote.

I think that "Consumer Economics" should be integrated into high school curriculums, and one of the topics therein ought to be "Consumer Insurance" to enable consumers to become aware, not only of what a homeowner's policy and an auto policy are for, but also of issues such as the one Robert Hunter has identified.

Mr. Hunter's starting place seems to be that Big Brother (whether government or insurance agent) has a responsibility to protect the consumer from his own bad choices (a trial attorney's dream land).

Free-market capitalism advocates that consumers must take responsibility for their choices (provided business is conducted legally and ethically), and the education necessary to make those choices.

Under the protectionist paradigm, where would the list end? Should Home Depot provide a disclosure of the brands it does not carry? Should my doctor inform me of other surgeons who have had more experience in a procedure (when he himself is competent)?

Should auto dealer X be required to put up posters "educating" the public that brand Y performed better on crash tests?

Should I, as a start-up agency, be telling my prospects that the agency down the street has more experience and represents more carriers?

As to your first question, what is meant by the term "independent" agent? It is not an oxymoron at all.

Which of those words implies that the agent represents every insurance company? It simply differentiates one from the captive agent--no more or less. It implies that I have a contractual relationship to represent--and promote-- certain companies, but am controlled by none of them.

Mr. Hunter seems to have a pretty powerful bully pulpit, and our industry needs to be fully engaged in dialogue with him.

But if our conclusions are based upon different paradigms of economic and social behavior, that needs to be recognized and disclosed. (Perhaps Mr. Hunter should preface his writings with a disclosure that he does not advocate free-market capitalism.)

In my opinion, this is much to do about nothing important.

With all the insurance-related issues currently being discussed, analyzed, debated, promulgated and legislated, this is far down the list, if even on the list.

Let's give the American consumer a little credit for being informed. Does Mr. Hunter want all merchants and purveyors of products and services to hand out notices to prospective buyers that they can go elsewhere and get a cheaper price from a competitior?

So, if you go to a supermarket down the road from you, they would have to inform you that their competitor, a little further down the road, has a better variety and lower price for chopped meat. How absurd!

People often purchase goods from a merchant because it is more convenient and/or has better service, not just because it has lower prices.

Many of our insurance clients use our services for the above reasons and others, such as one-stop shopping for all their insurance needs, professionalism, expertise in certain areas, we are friendly, etc.

I would venture an educated guess that most consumers Deep Six the disclosure statements we receive in the mail from the merchants we do business with.

I have never walked into a Ford dealership and had them talk me into a Honda. Should car dealers put out a 20-page disclosure telling me what cars they don't sell, how much they cost and why they would be a better choice for me?

It follows the same logic.

Although much of our salesmanship is based on price, the "Independence" of the independent agent is more than company product, price and representation.

We recently had an automobile claim with an insured who had the 20-year-old young son with an at-fault event. The husband happened to be in the hospital at the time. The car was not drivable. The wife was near hysteria.

I took the information and called a repair garage owner that is also a client. He retrived the vehicle, repaired it, located a rental vehicle, and the claim was settled.

My guess is that in the world of the "captive" agent, although ultimate settlement would have also occurred, our "independence" allowed us to make it all happen with much less isolation.

Our customer knows they can probably purchase their Insurance at less cost, but they really don't have a lot of faith in the geeks and ducks.

Sam:

Look at the number of comments that this posting received!
It shows that it really struck a nerve with many people.

I remember when our slogan was: "An independent agent serves you first." Funny, but I took that slogan to heart, and it has served me well.

Far from being an oxymoron, the term “independent agent” ultimately translates into more choices for consumers.

First, you ask, “should inherent limits on carrier choice be automatically revealed to all who do business with agents?”

The fact of the matter is that many independent agents do explain what coverage they can and can’t write, and direct consumers on where to go for coverage if the independent agent doesn’t offer it.

And, in addition to all the direct appointments they have with carriers--which can number in double digits-- independent agents can also access different carriers through wholesalers, the excess and surplus lines market, and through other avenues such as our electronic platform called Big “I” Markets.

Conversely, captive agents are contractually restricted from writing coverage with a carrier other than the one company they represent and possibly from referring customers elsewhere.

More important, however, is Bob Hunter’s question: “What if the carrier with the captive agency force has the best price? Would the independent agent ever refer them across the street?”

This type of statement perpetuates the notion that price is always the determining factor in buying decisions, which is simply wrong.

Insurance buying decisions are made based on many factors--such as coverage, policy terms, customization of coverage, carrier reputation and financial strength, claims service, the service and reputation of the agency--in addition to price.

Further, the notion that a conflict of interest is created by offering choices which are responsive to all of a customer’s criteria for making decisions, rather than offering only one choice without any information about what else may be available to serve that customer’s needs, is nonsensical.

Also, the more important question to ask captive agents is if they are referring their customers to the independent agent across the street for at least a second, third or fourth quote and other options.

The fact remains that if independent agents do not offer superior products and service, they will lose customers---period. The competition in the real world is fierce. And walking away to choose another provider if expectations aren’t being met is the ultimate act of independence for any consumer.

Robert Rusbuldt
CEO
Independent Insurance Agents & Broker of America

It just isn't possible for one carrier to do all things well. As an independent agent, I can offer many different options and contract with others if I don't have what the client needs.

Captive agents have to attract in one area and make up the difference with other products. That is why the captive agent is so pressed to expand their book of business. That makes for a lot of pressure and stress, which I think hinders focus on the client.

I was trained by a captive and had the opportunity to be a captive agent for one of the largest, but have been glad many times over when I saw the recent claims problems.

I try to take several offers to the client, if possible. All of the carriers are well established--at least an "A" rating, with excellent service record, and great pricing.

Yes, I have told prospects that the policy they have is better, or after inspection the new one they are considering is better than what I could find for them after I had exhausted my resources.

I think the competition in the market will weed out the agents and companies that offer products that the client doesn't want or are not of good quality.

I also believe that even though there is pressure on the agent to get commissions, they will choose to educate and service, with integrity.

Many of us have relationships with direct and captive writers. It is very common to have mutual referral arrangements with other brokers and agents, and our clients appreciate it.

As independent agents, we do look out for our clients' best interest, and there are many times--both on the personal lines side and the commercial side--where we have told prospective clients that they are better off where they are, or we refer them to someone who might better serve their needs.

It is not uncommon to have them say, despite our referral, they want us to place their coverage.

Our culture at BHA is about building trust and credibility. How pretentious of you to stereotype the Independent agent as self-serving.

Not only do we provide choices in carriers and coverages for our clients, but we also give back to our communities by living, working, worshiping and volunteering! I AM PROUD TO BE AN INDEPENDENT TRUSTED CHOICE AGENT!!

Joe Hernandez, ARM,AAI
President/COO
Branch Hernandez & Associates
Las Vegas, Nevada
www.bhains.com

Sam, I have participated and enjoyed your roundtables and on a broader note, your contribution to the property-casualty industry for years. Thank you for tackling the complex and difficult issues.

I read with intent, humor and concern, the joint thoughts of you and J. Robert Hunter provoking thinking toward a different approach to disclose details of carrier representation, numbers of companies, explanation of independent vs captive/exclusive--all under the umbrella of the "new wave" disclosure trends. Any regulator reading this would have "visions of sugarplums dancing in their heads."

In my opinion, you and J. Robert, in an attempt to enlighten, have crossed the line, moved to the dark side, have taken a sip of the Spitzer Kool-Aid.

An independent agent or captive/exclusive agent operates 92 percent of their units in personal lines or small commercial accounts. The demographic of boomers aging, plus X- and Y-geners controlling 60 percent of the labor force in 2010, begins the revolution to techno-savy consumers, educated and informed, with a high level of comfort to use technology to validate purchase decisions.

When we walk into Walmart, Target or Kohls, we have little interest in their suppliers, the leverage they use, or what they do to establish their final sales pricing.

However, we will evaluate the pricing of all three and then evaluate the total shopping experience, determining which we will patronize in the future.

Sam, more disclosure means more regulation, more audits, layered costs, adding to an already "out of control" body of insurance commissioners looking for a cause. Ruminations are fine and academic exercising can be beneficial. Not in this case.

We are an industry that has a history of honoring our contracts---completing the promise. INDEPENDENT AGENTS ARE JUST THAT----VERY INDEPENDENT!!!

Captive agents are "one company" franchises that have a different value proposition. It is the responsibility of those agents and customers to enlighten each other as to the advantages or disadvantages that inure as a result.

For a change--let's get out of the way and allow the free market principles to work. I, for one, believe it is not broke. So, again, what is it we are trying to fix ? Or disclose? Or regulate?

Ray Thomas,
Retired CEO & President,
Zurich NA Small Business