I posted a blog entry on June 5, followed up by a column in the June 25 edition of NU, basically raising the question of how truly "independent" independent agents are. I wondered whether such intermediaries fully explain to prospects and clients that their "independence" is limited to serving as agents for those carriers with which they have contracts--that in fact they are not "independent" to do business with just any carrier at any particular time. One agent threw down the gauntlet in a July 3 e-mail and asked for an apology. Click on for our exchange, and please log on to offer your own take on this controversy.
On July 3, David D. Warren addressed the following e-mail to me:
I read with interest your editorial in the 6/25/07 issue regarding what you claim to be an "oxymoron" in the term "Independent Agent." I would like to offer you a few comments as a rebuttal to the tone of your article.
It is patently obvious that an agent or agency cannot represent or be appointed by every company authorized or admitted to do business in the state of domicile. I think most of us out here in the trenches make a diligent effort to secure appointments with companies that we feel will best serve our clients.
Now let me give you a little background music.
I was exposed for the first time in the early '70s to the concept of "utmost good faith" while studying for my P&C license. Having, at that time, spent 15 years in the life insurance business as an agent, this was like a breath of fresh air. What a wonderful way to conduct business!
Since that time, our agency has followed that concept in ALL of our dealings with clients, companies and fellow employees. We do not deviate from this at all.
Now the proof of the pudding is in the eating, and here is where the rubber hits the road.
We are primarily engaged in securing medical malpractice insurance for our physician clients. Our client base consists of single docs up to the larger group practices.
Several years ago, we had a serious hard market with medical malpractice insurance in Florida. There were a few carriers that we did not do business with--direct writers, and one company that we did not have an appointment with.
Realizing that the availability of coverage and the rates from these carriers were better than anything we had for a number of our clients, we referred these clients to these companies. As a result, we lost 40 percent of our book of business over a two-year period.
Now, my questions for you, sir, are quite simple:
First, is this an example of "utmost good faith"?
Next, is this what an independent agent who works for the benefit of the client is supposed to do?
If your answers to the above questions are yes, then I submit that there is an army of "independent agents" out here who are deserving of some form of apology from you.
Thanks for listening.
SAM RESPONDS:
First of all, I think Mr. Waren's agency deserves a medal for honorable service--perhaps we could call it, "The Agency Award For Utmost Good Faith."
Yes, indeed, Mr. Warren and his agency deserve applause for doing right by their clients--even if it cost them business in the short run. They could easily have presented their clients only with quotes from their own limited stable of carriers--albeit at a higher price and for worse coverage--and perhaps had kept the accounts, at least in the short term. In the long term, however, their credibility might have been shot for good, giving them no chance of ever winning back that business.
I raised this issue in the context of a challenge from J. Robert Hunter, director of insurance for the Consumer Federation of America. I believe the challenge is a valid one: Do agents, who brand themselves as independent, explain to clients what that means, exactly. Consumers are clueless enough about insurance, in general, and I wouldn't be surprised if a large percentage do not understand that their independent agent is not free to seek the best market from just any carrier.
Disclosing this fact of life is all I was getting at. My intent in raising this issue was not to insult independent agents or imply that they are all purposely misleading their customers. I brought up this topic in the spirit of full disclosure, given the contingency fee scandals that unfortunately tainted intermediaries of all sizes and stripes.
However, responding directly to Mr. Warren's challenge, I don't feel I owe anyone an apology just yet. In fact, I can't help but wonder how many agents in Mr. Warren's precarious position would have acted as he did in an impossible market.
That's the question I am posing to my readers today. I am putting all of you on the hot seat with me!
Would Mr. Warren's response be the common one if you found yourselves in his situation? If so, then perhaps I have underestimated the selflessness of my readers, and I will sincerely apologize. If not, my challenge on disclosure--at a minimum--stands.
Comments (5)
Having been in the position of agency owner and now in the position of offering advisory services to agents, brokers and insurance companies, I have and will continue to recommend offering the client his or her best option, even if that is recommending another agent.
This is done without significant loss of income by having in place with those agents deemed to have better products, a simple cross-sell agreement that protects account ownership and provides revenue sharing on the account.
Posted by Edward Kalbaugh | July 18, 2007 12:36 PM
Posted on July 18, 2007 12:36
Independent agents must inform clients that there are other insurance companies offering the same coverage/terms/conditions at lower cost.
The agent must appeal to the client on the fact that the lowest price isn't necessarily the best deal.
A successful agent is one who has clients who are willing to pay a bit more for their coverage because they want to be serviced by their agent--not someone else.
Posted by David Skolsky | July 18, 2007 4:08 PM
Posted on July 18, 2007 16:08
Sometimes independent agents need to act as the adviser and not the salesperson. This unexpected action is appreciated and rewarded in the long run.
However, we can't get into the trap of trying to be all things to all people. There is always someone who has or will have something better, cheaper, or faster than you do.
Jeff Cluxton
Spring Resources, Inc.
Posted by Jeff Cluxton | July 19, 2007 9:25 AM
Posted on July 19, 2007 09:25
Sam, there's no need for an apology on your part. There is considerable consumer confusion over what “independent” means in the context of an insurance agent.
The use of the term “independent” is part of the problem. Such agents are not independent, but rather multi-dependent on the various underwriters they serve!
I can easily see how a consumer would think that an “independent” agent would present a buyer with a comprehensive array of all choices in the market. As we know, this is not the case.
I certainly applaud those agents who make the proper referrals to other markets for clients they cannot handle.
However, the decision for such action in the examples cited rested with the agent, when it should have been made by a fully-informed client.
Transparency and disclosure in all transactions, not just those where the agent decides it important, is the solution.
Posted by Peter Viscardi | July 19, 2007 10:09 AM
Posted on July 19, 2007 10:09
Part of the issue is definitely the question of what 'Independent agent' means to the public.
That is part of what the Independent Insurance Agents and Brokers of America is trying to address with its 'Trusted Choice' branding campaign--putting a clearer message out there that we offer choices.
Not necessarily every choice, but choices nonetheless, as opposed to captives and direct writers.
Having said that, our office also refers a lot of people to other sources when we know they can get a better deal or better market (i.e. admitted vs non-admitted). That's an ethical business practice that is critical to holding our heads high.
Posted by Aaron Stein | July 19, 2007 6:50 PM
Posted on July 19, 2007 18:50