“If you select me as your agent, the savings will enableyou to purchase and pay for that new truck you need!”

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That was the closing line of a young producer's presentation tothe city council of a small Midwestern city in a rural farmingarea. Preceding him were several other presentations from agentscompeting for the business. The other agents kept to the normalregimen of quote-and-bid presentations, with a lot of insurancelingo thrown in. They didn't get the business.

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This particular producer took time to learn about the needs,risks and exposures of his prospects. He talked to them in theirlanguage, not his. In this case, while researching the exposuresand needs of this small city, he listened to them talk about howtough it is to manage the budget in the current economic situation.One of their biggest concerns was that the city needed a new truck,but couldn't find any room in the budget to pay for it.

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Related: Read another column by Jack Burke “WhatAnimals Teach.”

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Luckily this producer's agency also believes in partnering withits clients by providing access to resources that can better managetheir risks and costs. His presentation outlined new methods toimprove return-to-work times, increase safety awareness, bettermanage claims, implement a wellness program and conduct seminars tobetter educate the management of the city.

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At his turn to pitch the council, he quickly reviewed thecoverages being quoted, then showed the potential savings that thevalue resources could bring to the table. As he showed the premium,he put it in terms they could understand and appreciate: His quotewould provide the savings to pay for the truck.

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Sounds simple, doesn't it? Yet all too many producers speak ininsurance terms and line-item quotations, usually based on ananalysis of the existing policies' coverages, limits and gaps. Thatmay work for some CFOs, but most insurance buyers have little or nounderstanding of what's really being said. Plus they are viewingthe quotation as a strict line-item expense, seldom if ever viewingit as a savings or a potential return on investment.

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That's why the industry is self-commoditizing We create pricebuyers rather than nurturing value partners.

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Understanding the Process

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Speaking the language of value has several key components:

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1.Position everything in thelanguage of your prospect/client

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Nobody really gets excited aboutinsurance, so it's not surprising that most business owners andmanagers don't spend much time studying the issue and its language.Yet most insurance producers spout terms like “ex-mod,” “caps,”“gaps,” “P/C,” etc. Their prospects nod their heads but seldomgrasp the meaning of what's being said.

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Top performing producers know theprospect's industry and speak in those terms rather than insurance.Prospects understand that and appreciate it, giving that producerthe edge over the competition. After all, if you're going topartner with someone, you really need to know their industry.

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2. Research theprospect

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Due diligence for a producer is morethan analyzing past coverages for an apples-to-apples comparisonquotation. Top performers spend time reviewing risks, assessingmanagement policies and learning what the concerns of the prospecttruly are in relation to their business, not their insurance.

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This enables the producer to uncoverneeds that can be addressed with value. That's why theaforementioned producer related savings to a new truck rather thanfighting it out with the competitors on line-by-line pricecomparisons.

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Related: Read Jack Burke's column “Chicken and theEgg.”

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3. Quantify thevalue

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We have heard about TCOR (total costof risk), but we seldom align it with TVOQ (total value ofquotation). For instance, TCOR points out the true costs of aninjured worker, costs that are well beyond the medical expenses. Ifthe prospect understands the basis of direct and indirect costs,that is an effective way to present a quotation. However, whenvalue resources are brought into play, their value and potentialreturns can be coupled with the TCOR figures for a trulyeye-opening presentation that will send the competition scurryingaway with their tails between their legs.

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The Process ofQuantification

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An article from AA&B's November issue (“Chicken andthe Egg”) showed a chart from an agency detailing improvements inworkers' comp claims over a 5-year period. One county decreasedclaims from $573,830 during the 2005-06 fiscal year to $12,817 in2010-11. Dramatic presentation, right?

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Unfortunately, that was only a small part of the puzzle when itcomes to quantifying value. Showing more than $560,000 in claimsreductions is great, but what if that chart was expanded to:

  1. Add the indirect costs related to those claims that are notcovered by insurance. Conservative estimates place average indirectcosts as four times the direct costs. Now you're adding $2.24million to the $560,000. But don't stop there: Run rate comparisonsbased on the experience mods of 2005-06 versus 2010-11. Add upthose differences in premium reduction and add that to the total.By taking time to estimate the differences in total, you'representing nearly $3 million in savings.
  2. Include all of the value resources that were brought into playto assist in the management and process improvement responsible forthe decreases in claims. Add in the value of those resources andyou're well over $3 million.

When presenting against potential competition, the producerdoesn't need to worry about premiums that might be a bit higher. A$15,000 variance is easily offset and justified with more than $3million in savings brought to the table by that producer's agencythrough their ongoing partnership.

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Peddler or Partner?

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When properly implemented, the strategies of language, valueresources and quantification will position you effectively in thevery competitive world of insurance. Because you are walking thewalk rather than talking the talk, it isn't even necessary to say“…and we provide good service.” You've proven it without having tosay it.

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Related: Read the column “Balance Sales andRetention” by Jack Burke.

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Peddlers sell insurance in an increasingly commoditized world.Partners present value that offsets price. Which are you?

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Next month we'll be going into more detail on the language ofvalue, but in the interim it might be interesting to conduct aninternal audit. Do you speak the language of your clients andprospects? Do you bring value resources to the table? Is the valueyou present quantifiable?

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