Daily sales & marketing tips for insurance professionals

Insurance scoring—insurers loooove it, and they think everyone else should heart it too. They insist that prices stay low because insurance scores (which include but are not limited to a person’s credit score) have an impressive knack for predicting risk.

But the public and state regulators need regular convincing, with fairness their primary concern. The NAIC recently convened a public hearing on insurance scoring, and industry representatives were forced, once again, to defend the practice, largely against a 2004 study conducted by the Missouri DOI.

The Missouri study revealed that the strongest predictors in a consumer’s insurance score were race and income, a fact which—rather understandably—created some hostility among the public and nervousness among policymakers.

The Insurance Information Institute (III) criticized the report when it came out in 2004, pointing out methodological errors that they said were the result of a pre-existing bias against the practice. Further, the III said, the Missouri department of insurance failed to acknowledge the benefits bestowed by insurance scoring: “The study’s opinions imply that the MDOI is prepared to eliminate the credit-related discounts currently offered by insurers to thousands of minority families living in Missouri as well as to homeowners and drivers throughout the state.”

Most states allow credit-based insurance scores, which is a fact commonly touted by insurance industry groups. (They’re less excited about mentioning that 48 states have laws putting certain restrictions on the practice.)

The faltering economy and tightening credit markets have sparked new criticism of insurance scoring. Critics predicted that the poor (whose ranks are swelling and whose credit scores have suffered) would be dealt another blow with worsening insurance scores and thus higher premiums.

“If insurance prices started to rise for no good reason, at a time when the public was least able to pay more, it would be a political, regulatory, and public relations disaster,” said Brian’s Sullivan’s May 18 Auto Insurance Report (print only, subscription required). “Insurers would be headed for a fierce beating, and worse, it would be well-deserved.”

Sullivan reports that while insurance scores are indeed dropping, they have not dropped as steeply nor been as volatile as credit scores, and that is good news for the insurance industry, because it means that insurance scores are calibrated well enough that they don’t simply mimic credit scores. (Many people falsely equate the two.)

Ultimately, though, the insurance scoring debate will probably stick around for a long time to come, with neither side landing a fatal blow against the other. Part of the reason is that the two sides approach the issue from radically different places. The insurance industry’s arguments, which center around efficacy, accuracy and low prices, don’t hold sway with opponents, who think that there is some larger issue of fairness at stake.

Finally, someone is putting some heat on doctors, who, just like mortgage lenders and AIG execs and the rest of us, are sometimes motivated by greed:

Somewhere in the United States at this moment, a patient with chest pain, or a tumor, or a cough is seeing a doctor. And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue.

There is no insurance system that will make the two aims match perfectly. But having a system that does so much to misalign them has proved disastrous. As economists have often pointed out, we pay doctors for quantity, not quality. As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients. Both practices have made for serious problems.

That passage is from Atul Gawande’s article in the New Yorker, and his words are sure to earn him a few enemies in the ranks of the American Medical Association. Let’s hope Obama and health secretary Katherine Sebelius read it.

Gawande, a practicing surgeon and award-winning author,  visited a small border town in Texas that has the highest per capita health care spending in the country. He wanted to understand why this town was spending so much for care yet not actually delivering better health outcomes.

Doctors in McAllen, Texas, it seems, are a uniquely enterprising bunch, and they “treat patients the way subprime-mortgage lenders treated home buyers: as profit centers.”

Gawande isn’t the first to put the screws to doctors, but his article is perhaps one of the most unflattering portraits of the medical profession to date. We tend to idolize doctors and assume they operate solely with our best interests in mind. While most do, a few have let the profit motive take center stage.

If we’re to adequately reform our health care system, Gawande writes, we must address the issue of doctor compensation—specifically, we must develop a payment structure that rewards quality, not just quantity:

Activists and policymakers spend an inordinate amount of time arguing about whether the solution to high medical costs is to have government or private insurance companies write the checks … When it comes to making care better and cheaper, changing who pays the doctor will make no more difference than changing who pays the electrician. The lesson of the high-quality, low-cost communities is that someone has to be accountable for the totality of care. Otherwise, you get a system that has no brakes. You get McAllen.

Read the complete article.

As you probably know, people are on the move these days. They’re not leaving town, they’re leaving insurers.

A sour economy and rising premiums have consumers hunting for cheaper insurance. Today’s Insurance Journal reports on a new J.D. Power study showing that 30 percent of households making under $50,000 shopped for insurance in the last year. Of those, 45 percent ended up switching carriers.

The study, formally known as the “J.D. Power and Associates 2009 Personal Insurance Retention Special Report,” shows that wealthier households have been relatively less footloose. Of those earning more than $100,000 per year, 26 percent shopped for lower rates, with 31 percent eventually switching.

There’s generation component as well: generations X and Y are the flightiest groups, renewing at rates of 88 percent and 80 percent, respectively. On the other extreme, 93 percent of Pre-Boomers, those born before 1946, have been renewed with their insurers in the past year.

Retention is essential because it costs significantly more to acquire a new customer than it does to retain an existing one. What’s more, according to the J.D. Power study, many insurers do not make a profit from individual policyholders until their third or fourth year.

The data reveal that people with multiple policies with the same insurer are less likely to switch. State Farm, for example, was able to retain 97 percent of its customers who had bundled auto and homeowners policies, but they could only hold on to 88 percent of their customers who had only an auto policy.

So dust off the old charm and start cross-selling!

Today’s L.A. Times has a fascinating story of failed life insurance fraud—but unlike the bone-chilling story of Olga Rutterschmidt and Helen Golay, the ladies implicated in this scheme did not kill the insured: they fabricated them.

Faye Schilling, 60, and Jean Crump, 66, bought life insurance policies on two fictitious people, obtained fake death certificates and staged their funerals, in one case adding ballast to a casket to simulate the weight of a corpse.

You almost have to admire the creativity of it. Read the full story.

• Related: Life Insurance and Murder!

Whether you consider it your morning coffee or a mouthpiece for leftist propaganda, National Public Radio (NPR) can rake in money like no other, and we could all learn a thing or two from them.

Slate.com contributor June Thomas has an excellent piece that dissects the “cunning genius” of NPR’s pledge drives, and her article inspired this blog post.

While you’re not a non-profit media organization, the principles that NPR uses to raise cash are the very same ones that will help you build your for-profit insurance agency.

Here they are:

Know your market. NPR knows exactly who they’re talking to: middle- to upper-middle-class people who drive Volvos and bring their own shopping bags to the grocery store. Can you come up with a similarly specific portrait of your average client? The better picture you have, the better you can tailor your marketing message.

Give a gift. NPR understands the law of reciprocity. They give away their product for free and then oh-so-subtly shame people into paying for it later. While you can’t exactly give away a car insurance policy, you can give a smaller gift. Recently I saw that an insurance agency in Denver was giving away free atlases in exchange for coming in and getting a quote. Perfect. The law of reciprocity holds that when you give something, people feel social pressure to give something back.

Raise the stakes. NPR does this by pushing the notion that you’re not simply giving money to a radio station—you’re contributing to a cause, joining a community, saving journalism, etc. You can raise the stakes too. Try to instill the idea in prospects that they are not just buying a insurance: they are getting an advocate (you, the agent), building a safety net, gaining valuable peace of mind, supporting a local business, etc.

Use social proof. During pledge week, public radio hosts constantly update you with who has just donated. Often they include a quote from the person explaining why he/she made the donation. “Kathy from Englewood just pledged $120, saying she couldn’t make her morning commute without Steve Inskeep’s comforting baritone.” Hearing about other people pledging makes others more likely to pony up.

Be awesome. The last way you can be like NPR (and this is where I reveal my radio-listening bias) is to be really good at what you do—so good that people give you money even when they don’t have to.

Nina Zagat, publisher of those ubiquitous maroon restaurant guides, is branching into the health care industry. (“Noted Rater of Restaurants Brings Its Touch to Medicine,” New York Times, Feb. 15, 2009.)

Zagat is asking WellPoint Blue Cross members—who number in the millions—to rate doctors on trust, communication and availability, among other things.

What to make of this trend?

“It is curious that they would go to a company that had no experience in health care to try to find out how good a doctor is,” a doctor told the Times. “It certainly is very subjective.”

Most of the health care professionals quoted in the Times article were hostile to the idea. It’s easy to see why—this would make them more accountable. Which is why I welcome the development and hope that it catches on with more insurers.

Our usability guy, David Lansdon, is in the midst of revamping the online application that agents use to sign up for our lead service.

After reading some consumer survey responses, it seems we may want to add a few questions to that application.

In addition to asking for their carrier information and helping them set up filters, we should quiz them about their selling techniques.

Because it seems a few agents on our service have some bad habits.

Consider this comment we received on Feb. 5:

The little @#$% was very rude. Tried selling me insurance I didnt ask for. Laughed out loud at me and said I was a fool. I will never use your service or refer your service. Will was the original salesperson but he pushed me off on another loser that was insulting. Thanks for nothing, [name and number omitted]

Perhaps we should add the following questions to our agent application:

• It’s OK to laugh at a prospect. True or False
• It’s OK to call a prospect a “fool.” True or False

Here’s another comment we receiving on Feb. 6:

spoke with a “man” named Bill on 2/4/09 and he was one of the rudest people i have ever spoken with …  he got mad and SHOUTED into the phone “well thanks for wasting my time” i would never deal with a company like that and i’m sure other people have been bothered by him also!

More questions to add to the agent application:

• It’s OK to shout at a prospect. True or False
• It’s OK to tell a prospect he/she is wasting your time. True or False

And another depressing one from Feb. 7:

Instruct your sales people to not act like used car sales men – they were incredibly pushy which reminds people that it’s all just about selling something. One person hung up on me in mid-sentence because I wasn’t interested in what he had to offer. Very unprofessional. I bought an insurance (because I need one now)since I do not have the luxury of time at the moment and went with the first company that called. But this was not a pleasant experience and the sales agents were incredibly pushy and rude.

Additional quiz questions:

• It’s OK to hang up on a prospect. True or False
• It’s OK to be pushy and rude. True or False

I realize that survey data can skew negative and that there are many more great agents out there than bad. But, sheesh, this is pretty discouraging.

*Rejected headline: Sales Tip of the Week: Don’t Be a Jerk

We just added a new article to the resource center that may interest you: Tips for Email Mastery.

Email is fast becoming (or already is) the dominant medium for communication. Call it impersonal, call it lazy, email is not going anywhere, so working to improve your writing skills is an endeavor that will bring significant rewards.

So check out these Tips for Email Mastery. And learn how to:

• Write better subject lines
• Set the right tone
• Get a response

While it’s not essential that you wax poetic in your every electronic correspondence, it is essential that you communicate clearly and persuasively. As legendary copywriter Donna Baier Stein said, “Response is the end goal of everything you write.”

Here’s the New Yorker’s Atul Gawande on why health care reform should be an organic, iterative process that improves upon existing structures and not a  radical, idealogy-driven razing of the current system.

He looks abroad and at the history books  to bolster his case.

“Every industrialized nation in the world except the United States has a national system that guarantees affordable health care for all its citizens,” says Gawande, who is also a practicing surgeon. “Nearly all have been popular and successful. But each has taken a drastically different form, and the reason has rarely been ideology. Rather, each country has built on its own history, however imperfect, unusual, and untidy.”

For example, Britain’s national health care system came not from mini socialist coup, but as an accident from a that country’s preparation for the Luftwaffe:

As tensions between [England and Germany] mounted, Britain’s ministers realized that they would have to prepare not only for land and sea combat but also for air attacks on cities on an unprecedented scale. And so, in the days before war was declared, the British government oversaw an immense evacuation; three and a half million people moved out of the cities and into the countryside. The government had to arrange transport and lodging for those in need, along with supervision, food, and schooling for hundreds of thousands of children whose parents had stayed behind to join in the war effort. It also had to insure that medical services were in place—both in the receiving regions, whose populations had exploded, and in the cities, where up to two million war-injured civilians and returning servicemen were anticipated.

After the war, they essentially said, “Hey, we’ve got this sweet health care system  in place, let’s keep it.” When the National Health Service came into effect, in 1948, it wasn’t even the biggest news story of the day. “Instead, there was only a four-paragraph notice between an item on the King and Queen’s return from a holiday in Scotland and one on currency problems in Germany.”

There’s another reason why health care reform in the U.S.  will have to come slowly:

American health care is an appallingly patched-together ship, with rotting timbers, water leaking in, mercenaries on board, and fifteen per cent of the passengers thrown over the rails just to keep it afloat. But hundreds of millions of people depend on it. The system provides more than thirty-five million hospital stays a year, sixty-four million surgical procedures, nine hundred million office visits, three and a half billion prescriptions. It represents a sixth of our economy. There is no dry-docking health care for a few months, or even for an afternoon, while we rebuild it. Grand plans admit no possibility of mistakes or failures, or the chance to learn from them. If we get things wrong, people will die. This doesn’t mean that ambitious reform is beyond us. But we have to start with what we have.

Interesting read if you’re into long, windy, Gladwell-esque  articles (I am). (Link)

Are we still using the same old high-pressure sales tactics?

Sadly, the answer is yes. I don’t mean to impugn you personally, dear reader, but it seems that a few of your colleagues still resort to bullying.

Since Jan. 1 we’ve received five (5) survey comments from consumers who felt pressured by our agents. It’s clear these thugs don’t read this blog, because if they did they’d realize that high-pressure tactics are one of 10 best ways to lose a prospect.

received a phonecall before I got the online quotes from what appears to have been a high pressured used car salesman

I had two phone calls from salesmen. One was high pressure, take-it-or-leave-it. I understand that these people are paying for your service, but this was a little much. The second phone call was a nice gentleman who would not get off the phone and who was offering a schlock deal. I would not trust anybody contacted from your service because of this and did not even bother to look at the emails.

agents should try being a little less aggressive and a lot more honest.

well, i received only one call/email…the sales guy used very high pressure tactic

when some one calls and there told that now is not a good time and they won`t take call me later then there just too damm pushy and all there looking for is the fast buck then my needs do not come first Please remove me from your list

I realize that not all agents can be great, but this was rather dispiriting.  Clearly, these agents (who knows, maybe it’s just one or two) are out of ideas. Or perhaps they’re simply in the wrong industry. But let’s not go out on a sour note, because there are certainly great agents out there who don’t bully prospects.  Here is some evidence: [Last names have been abbreviated]

I have been working with agent, James G., and his service and follow-up was very professional. I intend on contacting him with future insurance needs.

eve f.

Brian was amazing! Very helpful and informative. Thank you!!

No improvement needed. The agents were prompt, professional and informative. Mr. Gray with Farmers, got my business, and was very kind. I would highly recommend him and your service to all my family and friends.

Kenya was excellent and pleasant, knowledgeable, and very helpful. She was very fast to supply information to me.

Thanks,

Bill

Service is great, all the agents that contacted me were quite gracious and honest. However, you might note that AARP member discounts such as the ones I enjoy cannot be beaten on the open market. At least here in Kentucky. Sad how high the cost of insurance is in this state compared to how it was in CT where there seem to be 10 times the crazy drivers, but the key is, I’m told, the high number of uninsured motorists here.

Thanks for your quick turnaround.

On one side we’ve got aggressive, pushy, high-pressure, used-car salesmen. On the other, agents who are gracious, honest, helpful, informative, pleasant, knowledgeable, kind, prompt and professional, and the agent who was praised as “kind” is going to get recommended to “all my family and friends.” Think about that.

What kind of agent are you? Are you pushy or are you pleasant, like Kenya?