Combating a trend towards faceless online insurance purchases, Nevada insurance agents and brokers seek to educate the market on the importance of a trusted insurance advisor. Recently, executives in this industry met at the Las Vegas offices of City National Bank to discuss the challenges they face.
Connie Brennan, publisher of Nevada Business Magazine, served as moderator for the event. These monthly meetings are designed to bring leaders together to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.
How has the industry changed with online Offerings?
Greg Pike: It’s generational. In today’s society, I can go online and buy anything I want and have it delivered on my doorstep. When it comes to transactional related insurance, like homeowner or automobile, they can do it online quicker and faster. The problem is they miss that connectivity with a professional who can actually provide sound advice on what each of the coverage issues are. They’re not getting the right level of education on what they’re actually purchasing. There is nothing that will ever replace the expertise, experience and the sage and sound advice that is going to come out of the professionals.
Alex Kleytman: The industry has been capitalizing itself for the last decade with the advantages of the Internet. The sophisticated consumers do need that advice and want to protect their assets. When you’re buying a risk transfer instrument, saving ten dollars a month may be great for a 22-year old, but not so much for a household with a significant net worth.
Francie Stocking: It’s more of a commodity for the people who go online. It’s about getting it done quickly to satisfy the DMV so they can be on their way. People who have a higher category of wealth or more assets want more face-to-face where we can be an advisor.
Jeric Leavitt: I see the market trying to find some middle ground. Google has come out with their Google Compare product. It’s a platform where you can do some online shopping but at the same time it recognizes that there has to be an advisor. It has a mechanism where you put in your information and it knows what carriers like this particular information, so it will tell you whom you should go and talk to.
Kleytman: We need to engage customers and talk about their coverages instead of them engaging us to talk about their price. It’s about taking care of our customers the right way instead of just giving them the better price.
How did the recent change to construction defect laws affect insurance?
Leavitt: The legislation on construction defect really made a big difference for us. It essentially made it more difficult to sue for construction defect. We’re hoping that as a result more insurance companies will come in and bring their prices down a little bit so there’s more competition amongst carriers who are writing contractors and residential work.
Pike: Historically, it’s a consumer protection piece of legislation that says if you build a product and sell it to the general public, such as a home, the builder is liable and responsible for that product statutorily for up to 10 years. For the first 10 years, the homeowner or group of homeowners can file a complaint or action against the builder for defects found in the house. The legislation brought it from 10 years down to six years; you have to discover and report the defect within six years.
Is the industry over-regulated?
Earl McDowell: We’re at the right spot. Most of the time consumers don’t understand what they’re getting when they buy something. For instance, they buy health insurance but they don’t have a clear understanding of what it covers and what they’re really getting. Regulations are set up to make sure they have the right things but they don’t take the time to ask those questions to see what a particular plan is going to do for them so they end up blaming whoever they bought the product from. They didn’t do anything wrong, the consumer just didn’t ask the right question.
Pike: There’s more federal regulation when it comes to the healthcare side of our industry and it’s more state-driven consumer protection on the property casualty side.
Is fraud an ongoing concern?
McDowell: Fraud is always going to be a key area. It’s fraud to the consumers when they think they’re paying for something, but at the end of the day they don’t have it. You have a lot more issues with the smaller companies. At least the bigger companies know if an issue comes up they’re going to get back to you very quickly and get it worked out. It’s usually the smaller companies that will try and take advantage of the consumers.
Pike: You have to have the right insurance carriers with the right investigative carriers in place. If not, people will take advantage of what the state law provides them under worker’s compensation [laws].
Leavitt: Another thing with fraud that we’re starting to see is, now that Metro stopped responding to accidents, you see more people taking advantage of it.
Is there a disconnect in client expectations?
Leavitt: It depends on how good of a job you do explaining the product. At some point there can be big gaps but the more you disclose, the more you sit down and have that face-to-face, the more you know about the business. Our job is to try and close that gap and manage expectations.
David Dahan: The expectation is a two-way street. We have to explain our products to clients, but we’re also expected to know what their needs are. Sometimes we spend quite a bit of time to better understand what their needs are so we can fit the product for them. They don’t always necessarily understand the need for the type of products that are available.
Stocking: The client needs to take some responsibility also and read what they bought.
Kleytman: For most of us, we sell a standardized product whether it’s, on the lower consumer end, home and auto or, on the larger end, multi-family dwellings and such. It’s a standardized product that is approved by the state of Nevada. Most consumers don’t realize what they’re giving up for $3, $200 or $5,000 a month. At the end of the day all they remember is they pay $18,000 a month for insurance and they think they’re covered.
Pike: I’d like to respectfully disagree with you on a comment [Kleytman] made. I don’t sell a standardized policy, I don’t represent a single insurance company. I spend a lot of my time understanding the differences between carriers, doing an analysis on what is and what isn’t covered. Selling an insurance policy is just one component of the risk transfer mechanism we’re finding on the upper end of the business side. Our customers want us to be more heavily engaged and act as their outsourced risk management. We’re being asked to do so much more today than we were being asked to do maybe 10 years ago. We have two attorneys on staff; we don’t sell legal advice but we do provide consulting reports where we’ll review all of their documents whether they’re signing contracts to build or purchase something. They have a better understanding of what they’re responsible for as opposed to doing it on their own and blindly signing. When you become an advocate for a client you have to look at all aspects of that risk, not just the one risk that drives the majority of dollars to your pocket.
How competitive Is the insurance industry?
Dahan: It’s very competitive.
Olivia Valery: I specialize in group insurance, which is a blessing for me in the sense that I don’t have to worry about marketing. MetLife does it all for me. But I’m always competing with the 800-number.
Pike: The ones you have to worry about are the ones who want to cut corners and do things on the sly and they’re only focused on how to sell it cheaper. We’re not the bottom line company that’s going to save you 10 dollars a month. We’re going to charge you twice as much but give you three times the services.
Leavitt: When you offer those added services it’s a lot more fun to do business because they feel like they actually need you.
Are insurance Consultants as well respected as other professionals?
Leavitt: I don’t think we’re there yet. There are a lot of people who do value that, but we need to make up some ground to be there.
Dahan: We have a long ways to go. They’re not looking for a vendor. We’re supposed to be a partner but everybody is going to define a partner differently. When someone is looking to purchase insurance, coming to a reputable agency or broker that is properly licensed and has the proper insurance protection, you can rest assured that the agency or individual is doing the due diligence. We have access to hundreds of companies that we could sell or represent, but there are companies that we refuse to deal with if we don’t find them to be reputable or if they don’t have the right rating. The amount of due diligence that an individual client might have is shared by the person they’re buying the products from, so we’re also doing due diligence on their behalf. If they find a trusted advisor then that’s just an added protection. We’re not going to sell a product that doesn’t meet or exceed the expectations that we have.
Is staffing a challenge?
Leavitt: People recognize there is a gap. Our agency is positioned where most of our brokers are under 40 years old.
Dahan: You hire for attitude and train for skill. Every single person can either enhance the reputation of the agency or destroy it. Hire the right people and then get to the business aspect of where can we fit them in our organization.
Valery: I am the last MetLife agent in Las Vegas. We had about 15 agents and it’s dwindled down. It’s hard to find people who qualify, and to get established as a career does also take a lot of legwork. Our younger generation is not as motivated to do the gruntwork to get it going; they want to be at the end when you’re already an agent.
Stocking: Everyone in their 20’s or 30’s want $80,000 to start and they want flexible time. It’s not like that; it’s hard work and that’s something that isn’t fun for people. It’s difficult to attract younger people to come into the business.
Dahan: From a financial standpoint this is a very unique industry because of its residual income. I don’t know if there’s any other business that has mastered the art of earning money year after year as long as you hold on to your clients. The biggest challenge you find with producers in our industry is they lack motivation. They know that next month they’re getting that paycheck anyway for something they did five years ago. There are a lot of pluses we can attract people with, but I don’t know if the financial side of that is the most attractive thing to the new generation. It’s about the flexibility, the opportunity to get out of the office and interact and to have the freedom to be who they want to be.