What is the Value of Your Advice?

Every insurance agent I know says he or she sells value. When asked to define what value is, sometimes things get a little interesting because there isn't really a standard definition. For some it's charging more and providing more; for others, it is charging the least for the most coverage. But the thing that will really provide value to your prospects and clients is your good advice.  Keeping people out of insurance trouble is always much better than getting them out of insurance trouble. 

Currently there is a financial talk show guru who gives advice on a wide range of subjects to guests and callers. On one show a caller had been asked by a friend to co-sign on his auto loan because he had a bad credit score. The caller was understandably concerned he would be on the hook for the loan if he co-signed and would have little control of the situation, but he really wanted to help this person out. The host of the show suggested the caller buy the car in his name, make the payments, let his friend use the car and collect what he could from the friend to offset the payments and taxes. If the friend couldn't make the payments, the caller could at least sell the car because it was titled in his name.

You're probably already ahead of me on this one, but what about the insurance?  Obviously the person buying the car would add it to his insurance policy, but if he added his “friend” as a driver and the friend didn't have a good credit score, how would this affect the rates?  Would underwriting even go along with it?  If this person had a loss, how would that affect the policy?  If the friend had a loss in a car not titled in his name and he was not carrying any insurance himself, how would a loss that exceeded policy limits be handled?  Who would the court look to for the additional payments?  The financial guru did not pursue this line of questioning. 

My thought was, how about helping the friend out with bus or cab fare so he could get to work and back?  Why provide a lifestyle for them?  My wife and I had dinner with Warren Buffett's daughter, Susie, one evening and she told us about her daughter (Warren's granddaughter) who was riding the bus back and forth between home and college. She hadn't saved up enough to buy a car so this was the mode of transportation that worked for her budget. If the granddaughter of one the richest men in the country can ride a bus, maybe someone with a bad credit score can do the same thing until they get their financial life under control.

There was another financial guru a few years ago named Charles Givens, Jr. He wrote several books, including Wealth Without Risk and More Wealth Without Risk (apparently you can never get too much of a good thing in the wealth area!). Givens was on the Today Show, held seminars all over the country and generally appeared to be very successful.  Then he was sued.

The transcript from the trial was fascinating and included not only himself, but his son, Charles III. The lawsuit involved the Givens' advice to drop uninsured motorist coverage.  One of the seminar attendees did just that and was killed by an uninsured motorist. The transcript indicates the following exchange with Charles III:

Q: What is uninsured motorist coverage?

A: I have never carried it.  I am not exactly sure.

Q: What is universal life insurance?

A: It is more expensive than term.  That is my knowledge of it.

I should mention that the Givens Organization is a big supporter of “Buy term and invest the difference.”  Do you think prospects and clients might want to receive advice from someone who actually knows the difference between the various coverages and products before they act on a suggestion to buy one or the other? 

In an adult education class I taught at Washington University, we covered uninsured and underinsured motorist coverage. During the break, one of the students approached me and said he had been carrying the minimum limits of UM and UIM for years. That was what had been offered to him by a direct writer and he had not questioned it.  The interesting thing was, this person had a law degree.  Once it was explained to him, he decided he needed much, much higher limits. What was the value of the advice I gave to him in the class?

An agent I met with recently, Ron Peach, who owns an agency in St. Louis and various locations in Illinois, told me he asked his prospects and clients what their “catastrophe number” was. He wants to know how much, out of pocket, the person can handle before it becomes critical or catastrophic for them.  He then applies it to auto insurance, homeowners, life, disability and health—not to sell more insurance, but to make sure they understand what will happen in each situation. The example he gave was someone being disabled who had 6 months of living expenses in savings but would then be on the street.  Using a 6-month waiting period saved a nice bit of money and allowed the customer to purchase the coverage needed without overspending on insurance.  In other words, Ron Peach provides good advice. 

If you are working on your “elevator speech” (explaining what you do for a living in a very short time), you might use something like, “I help people make the very best use of their insurance dollars by discussing their specific situation and giving them advice that, in some cases, could save them hundreds of thousands of dollars in expenses.” At least I know you could do that for fans of a certain financial guru who are getting generic and sometimes questionable advice.