26
MAY
2011

IQ UNIVERSAL TRUTH #3 – THE RULES OF THE INSURANCE GAME

One way to look at the competitive arena of insurance sales is to view it as a game. Going in with this attitude lessens the impact of a loss, and the philosophy of “we’ll live to play another day” or “we’ll learn from our mistakes and get em next time” offers hope for future. Wins are celebrated to re-enforce what we did right so we can repeat our performance. Accepting this premise, it’s important to understand the rules governing our “game” Here’s a list of rules I stress when working with producers that help level or even tilt the field in our favor.

Rule #1. Insurance sales is a 3 party transaction:

There are 3 main players in the game of insurance sales. You, the prospect, and the incumbent. Most producers focus their efforts on running their game plan to win points with their prospect. I suggest we look at our prospect not as the trophy, but as the referee. We need to adjust our game to compete against, and out score the incumbent. The prospect (referee) is judging our value proposition against the incumbent’s in a game where winner takes all. The end goal is not just to impress our prospect, but to out perform the incumbent. It’s a subtle shift, but one which focuses our efforts where they belong, getting the prospect (referee) to award us the business.

Rule # 2 Both producers and prospects play their game:

Our goals when engaging a prospect are to build rapport, assess their needs, and deliver a protection and service package that provides solutions.

What are the prospects goals? One clear goal is to introduce competition to drive down the price of insurance. They use a variety of tactics to get more value for their dollar. Can you blame them? Using competition as negotiation tool is part of our culture. The key is to recognize these tactics in order to prevail. Typical tactics include: Comparing coverage’s to leverage increased limits, reduced deductibles, or policy enhancements. Negotiating price by line of coverage, even when the overall price is lower. Negotiating on policy language. Negotiating on enhancement endorsements. Leveraging agency staff for free services. A clear understanding of exactly what the current program provides is key to being able to sell your advantages and hold the line on these tactics. Without this knowledge, the buyer can leverage low value items on the incumbent’s proposal to drive your price down, or negotiate up for valuable concessions. Information is power…understand exactly what you are going to be compared to, and avoid being manipulated

Rule #3. The incumbent has home field advantage:

We all know it. They have the relationship, they are a known quantity, they are a trusted adviser, they may even be a friend. It’s an up hill battle because you are none of these, and the prospect has yet to experience your service. A prospect will only endure the pain of change if the reward is worth it, or if we uncover enough pain to create a need for change. Understand going in, that you are at a significant disadvantage. Your value proposition must be significantly higher to win the business from the incumbent who is doing a decent job. And by value proposition, I’m not talking about price. Your prospect must perceive a significant improvement in the value of doing business with you. If they don’t, walk away.

Rule#4. The incumbent wins all ties:

Being as good is not good enough. Last look says it all. If what you offer is viewed as the same, there is no motive to change. If it’s the same but cheaper, the incumbent gets last look and wins. Your value proposition must demonstrate an ability to provide benefits that the incumbent can’t or hasn’t delivered. This approach drives a wedge between the incumbent and your prospect. The incumbent will have difficulty explaining why he/she hasn’t offered these benefits in the past, and dropping their price typically won’t cut the mustard.

Rule #5: For you to win, someone must lose:

Understand, you are not just asking your prospect to do business with you. You are asking the prospect to fire his/her agent. If you can’t grasp this rule, you will get rolled and used until you do. You must assess the current relationship to determine if the prospect can actually fire his agent before you invest one dime on providing a proposal. Unfortunately there is no easy way around it. You must negotiate a verbal agreement with your prospect that if you out perform the incumbent, you will get the business. Just as important, you must engage your prospect in a conversation about how they will approach firing their agent, and prepare them what the incumbent will do and say to keep the business. It’s no guarantee, but it will address an uncomfortable issue up front.

Rule#6. Winning is profitable, losing is costly

The cost of taking a middle market piece of business through the marketing process from start to finish nationwide is calculated at approximately $2,500. How many times does any business want to invest $2,500 to quote an account they don’t write? I’ve often shared this information with prospects so they understand what’s at stake for my agency, and why I’m trying to gauge my opportunity to win their business. They love transparency, and most respect you when you disclose your investment, and enter into a discussion about what it cost them to quote in their industry. In addition, the hidden costs of quoting & losing are significant when you consider the opportunity cost of lost time that could have been devoted to qualified prospects. Qualify your prospects completely. Ask the tough questions.

Rule #7: If you don’t keep track of the score, why play?

By score, I mean your personal statistics. The only way we get better at our game is by measuring and improving performance in areas where we are weak. I have found there are 5 natural stages in the sales process where we can measure and compare performance.

Ratio of prospecting efforts to appointments or opportunities

Ratio of 1st appointments to information gathering stage

Ratio of information gathering to submissions

Ratio of Submissions to proposals

Ratio of proposals to sales

By measuring success ratios you can quickly determine the areas of your game that are weak and focus you efforts on improving where it is needed.

These are the rules I’ve learned while playing the game of insurance sales. I’d be interested in hearing any rules you’ve discovered while playing the game in your hometown.

David Connolly
David@iqsalescoach.com

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