How to Combat the Perception of Insurance as a Commodity

Consumers are most inclined to purchase products from platforms that save them money and are simple to use. Insurtech platforms seek to take advantage of this by leveraging technological savviness in markets that, historically, have not been subject to disruptive technological advancements. This disruption has led to a distinct shift in how insurance products are viewed. What was once an industry governed by relationships, product knowledge, and market access has evolved into one driven by price and the simplicity of the service provided. These industry changes are causing many consumers to view insurance as a mere commodity. While this may be a trend in the industry, we all know each policy and carrier is unique in the coverage they provide and in their underwriting and claims processes.

So how can insurance agents challenge the perception of insurance as a commodity? By actively engaging in consumer education efforts, emphasizing the differences in policy coverages, and leveraging their product knowledge in tandem with technological developments, we believe insurance agents can solidify the need for an expert-level resource in providing these complex product offerings to consumers.

Why is Insurance Viewed as a Commodity?

There are multiple factors that have contributed to the perception of insurance as a commodity. For starters, digitization of the insurance purchasing process allows consumers to purchase coverage online, sometimes without ever speaking to an agent. Without a dedicated insurance agent consulting buyers on which coverage is right for them, consumers naturally focus on price as the primary buying factor.

Additionally, the insurance industry itself has been pushing price as the sole distinguishing factor between policies. For example, consider the advertising campaigns for Geico and Progressive, two industry titans with a combined market share of 25%. We’re all familiar with Geico’s tagline “15 minutes can save you 15% or more on car insurance”, a phrase that has been embedded into our brains as a result of millions of dollars of advertising. This slogan perfectly captures the mindset of many major carriers that price is the only thing distinguishing them from the competition. Progressive’s “name your price” advertising campaign further cements the idea that insurance is a commodity. By focusing solely on low prices in their multi-million dollar advertising campaigns, insurance companies insinuate that price is the only difference between insurance policies from different carriers.

How Can Insurance Agents Challenge the Perception of Insurance as a Commodity?

Having consumers view insurance as a commodity might be good for direct writers, but it doesn’t do much good for independent agencies competing with large retail-direct insurance companies. Obtaining insurance is a big deal, and insurance agents perform the important function of guiding consumers through the buying process to ensure they obtain the coverage that is right for them. Results show the following actions play a crucial role in an agent’s ability to reshape the narrative of insurance as a commodity.

Play an Active Role in the Buying Process

As an insurance agent, your customers rely on you to help guide them through the buying process. While it might be tempting to service as many customers as you can as quickly as possible, it is more beneficial for both your business and the consumer to craft a personalized service approach specific to each customer. Your main selling points are your customer service and expertise in the policies you issue. Lean into these attributes by guiding your customers through each step of the buying process, and showing them why they made the right decision in using an agent rather than purchasing their coverage online directly through a carrier.

Educate Your Customers

Educating your customers on the differences between policies is crucial to combating the trend of viewing insurance as a commodity. As mentioned above, big carriers have spent millions of dollars to convince consumers to focus solely on price. It is your job as an agent to help your customers understand the additional factors at play when it comes to purchasing insurance. Your customers might think they know what they need, but a whopping 60% of consumers admit that they don’t do any research before obtaining coverage. As an expert in your field, you can provide much-needed context and information to ensure your customers make informed purchases. So what’s the best way to do this? Well, a conversation goes a long way, and spending the time to really understand the specific needs of each customer and advising them on which coverages may protect them from future losses is the best way to ensure your customers’ needs are being met. Additionally, creating visual aids and providing easy-to-understand brochures on key policy differences can help your customer grasp the points you are making.

Focus on the Risks

67% of consumers are willing to purchase insurance from organizations other than insurers. This is a major problem, as consumers who purchase coverage online do not receive the same level of risk analysis provided by insurance agents, who are uniquely equipped to help their customers recognize the risks facing them and their businesses and then hone in on the specific policies that best suit their needs. In the event an accident were to occur, your customer will be grateful their insurance agent spent the time ensuring their needs were met. By focusing on the risks facing your customers, you are helping them understand that when it comes to insurance it is not about getting the best deal, but rather obtaining the best coverage.

Individualize Your Sales Approach

Big carriers allow customers to buy coverage with a few simple clicks at the lowest possible price, so wouldn’t it make sense to just ditch agents altogether? Absolutely not! Buying insurance is a very important decision with potentially huge ramifications if the right coverage is not obtained, and 21% of consumers say that insurance providers do not tailor their customer experiences. Don’t solely rely on sales scripts or rehearsed talking points, but rather get to know each customer on a personal level. Chances are new customers aren’t well versed in the different policy coverages available and rely on their agent to advise them. By individualizing your sales approach to focus on the specific needs of your customers, you are providing consumers with a crucial service that no algorithm could ever replicate, expert advice and guidance tailored to fit their needs.

What Does the Future Hold for the Insurance Industry?

People will always need insurance, it is what allows us to conduct business and engage in many aspects of our daily lives. No matter how convenient the buying process becomes or how much money carriers spend to advertise their low prices, one fact will never change; People need insurance agents to help guide them through the intricacies of the insurance industry. Your job as an insurance agent is very important. You ensure your customers are protected in the event an accident were to occur, and make sure they make it out okay in whatever situation they are facing. It may at times seem that the industry is trending towards further automation, but by providing expert-level product knowledge and engaging with customers you can leverage technology in a way that enhances the insurance purchasing experience rather than driving it to the lowest common denominator: price.

How can an Insurance Agent obtain a Surety Bond?

BondExchange makes obtaining a surety bond easy. Our thoroughly developed online system was built for insurance agents like you. Simply login to your account and use our keyword search to find your customer’s bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.