What do you do when a buyer says “It's all about price thisyear”? Prospects and clients don't want to pay too much forinsurance. Neither do you. This is true whether the market is hard,soft, or anywhere in between.

Yet when the insurance market is soft and economic times arehard, independent insurance agents face intense, price-driven salespressure. Plunging employee payrolls, reduced business revenues andshrinking property values by themselves decrease premiums. So dobuyers who increase deductibles, lower limits, eliminate coverageor, worst of all, go out of business. Those customers remainingfight for survival and shop their insurance plans ruthlessly.

Soft market, tough economic times, reduced rating basis, fewerclients and cut-throat competition create a perfect storm ofplummeting insurance commissions. What's an insurance professionalto do when buyers insist on cheap insurance as well? The answer:Provide the best value for every insurance dollar invested inprotection.

Related: Read Ed Lamont's article “Use 'CPR' on prospectobjections”.

How do you do that? First, know the advantages and solutions youoffer. Clearly identify your coverage, service, risk management andrelationship advantages. Be aware of the problems you, your agencyor your insurance companies solve for clients. To know the valueyou provide is the foundation for handling price objections.

Knowing your betterments is one thing; believing that youradvantages and solutions provide excellent value to buyers isanother thing altogether. If you don't believe you deliver bettercoverage, superior service or relevant risk management options,then why should your customers believe it?

Finally, how do you communicate value? What can you say to getacross your betterments, advantages and solutions? How do you helpinsurance consumers understand that the problems you solve oradvantages you offer reduce expenses, increase profits, or savetime?

Determine the true cost of insurance

When customers emphasize the cost of insurance as the mostimportant reason for doing business, do they mean it? Many do.Insurance premium is easy to compare when agents compete. Premiumis equally obvious when seen on a bill or entered on an income andexpense statement. If your customer anticipates having no claims orservice issues during the policy year, then it makes sense thatpremium be the basis to determine value, right?

But that's a huge assumption, isn't it?Protection packages built to reduce premium often cost buyersdearly when claims occur. Dollars paid out because of higherdeductibles, exhausted coverage limits or unanticipated retentionhave to be added to insurance premiums to determine the true costof insurance. Time is money, too. When service issues burdenbusiness owners and their staffs, revenue- producing activitiesstall and opportunities are missed.

So what is the cost of insurance to a buyer? Too often it'snothing more than premium dollars; the price of protection chargedby an insurance company and quoted by you. To help insuranceconsumers truly understand cost of insurance, think of it as aniceberg. Premium is merely the tip of that iceberg, the parteveryone sees because it's above the waterline. Deductible cost isunseen. Unplanned retention is hidden below the waterline. So arelost opportunity costs and “time is money” impact due to serviceissues. Like an iceberg, what's below the waterline is moredangerous than what is above. The Titanic didn't sink because ithit the tip of the iceberg, did it?

Related: Read the article “Sitting on a 'goal mind'” by TomBarrett.

When negotiating, buyers may insist that premium (the tip of theiceberg) is most important. Professional insurance agents and riskmanagers know better. Can you think of even one company that wentout of business because it paid too much insurance premium?Probably not. It's what's below the waterline that has thepotential to devastate ongoing operations financially, or worse,sink a business all together. But here's the key: If you don'tbelieve it, how will you ever communicate this critical riskmanagement concept to a buyer?

Communicate value

If you know the advantages you, your agency and your insurancecompanies provide, how can you communicate that value to prospectsand customers? What do you say when a buyer focuses on price? Moreimportantly, how do you say it?

The best way to communicate value is to listen, probe and thentie your advantages and solutions to your buyer's interests.Lecturing a buyer on the benefits of your betterments is “sellingby telling.” Instead, skillfully lead customers with questions thatreveal the value you provide. To do this, you must know and believeyour coverage, service, risk management and relationship advantagesthoroughly.

Before you try to handle any price objection, verifyunderstanding. Don't launch into an explanation without firstconfirming what your buyer means. You may be wrong.

Could “it's all about price” indicate service dissatisfaction?How could a price objection be related to service? Perhaps promisesmade weren't kept. Maybe a problem was poorly handled or worse,wasn't resolved at all. Consider this: Could a client have noproblems for you to fix, no material service issues to be handled,but also have paid its bills on time? Sounds like an ideal client,doesn't it? Be careful. It's exactly the type of client who couldwonder, “Why am I paying so much insurance premium and receiving solittle attention?” Poorly handled service issues or absence ofservice altogether are legitimate reasons for telling you, “It'sall about price this year.”

“It's all about price” also could be coveragerelated. A protection plan with high deductibles or loss-sensitivefeatures might have resulted in additional out-of-pocket expense tobe borne by your buyer. So could denied claims. Customers who addthe cost of deductibles, loss-sensitive plan payment adjustments orunpaid claims have valid coverage reasons to say, “It's all aboutprice this year.”

Finally, “It's all about price” could legitimately mean exactlythat. The stresses on business owners due to cut-throat competitionand the economic slowdown may have forced your buyers into survivalmode. By necessity, they need to ruthlessly examine all operatingexpenses, including insurance premium. You simply don't know untilyou confirm what a prospect or client means when they tell you,“It's all about price this year.”

Take it to the street

When you set negotiation rules or attempt to handle priceobjections, always confirm understanding first. Determine if themessage you hear means what the buyer is saying. Probe. Getspecifics. Determine acceptable conditions to meet. Ask questionsto see if your advantages, solutions and the value you deliver areclear to your customer. Remember to ask “below the waterline”questions. When done skillfully, questions are the best way tocommunicate value.

Related: Read Laura Mazzuca Toops' article “Retention versus newbusiness acquisition: What works?”.

Build a success log documenting occasions when a coverage,service or risk management advantage helped a customer save time orreduce expenses. Successes validate value. Create a solutions logto track the times you've solved problems for buyers. Solutionsanchor belief. Solving a prospect's problem is an excellent way toearn a new client. Solving a client's problem is the surest way toretain her trust and keep her business year after year.

Buyers purchase value. Cost is how insurance consumers measurethe value when weighed against the coverage, service, riskmanagement and relationship benefits you provide. To know, believeand communicate your advantages and solutions allows you to sellvalue, not price.

Don't succumb to a low bid mentality. It's a trap. If your buyerdoesn't ensnare you, don't set the trap on yourself by sellingprice instead of value. Separate yourself from your competition.Solve problems. Prove value. That way, “It's not all about pricethis year.”