A SURE HAND AT THE WHEEL

With my boss, Fred Wilson, at the wheel, we maneuvered the comfy van on to the highway and headed for the golf course. As manager of the company’s downtown branch, Fred was in close daily contact with many of our brokers. Today, however, it was a warm and sunny Friday afternoon in Spring. This was going to be an afternoon off for both of us. As the company’s senior marketing representative, I was looking forward to forgetting about our business cares for a few hours.

Beside us in the van was Bob Davies, a successful midtown broker, and Harry, who operated out of an office in the suburbs. We had picked up both brokers after lunch for the half-hour drive to Fred’s golf course. “Dave, don’t pull any of that birdie nonsense on us today, okay?” Harry said, reminding me that when we had last played together I had drained a curling 45-foot putt on the first hole for an unlikely birdie. “Got your attention, didn’t it?” I laughed, “I should warn you, I feel hot today”.

There was a grunt from Fred, who lifted one hand from the wheel to point out the side window. “Somebody over there is hotter,” he said. At the side of the road two cars were sandwiched together with a carpet of glass around them. A tow truck was hooking one of them up while the two drivers looked on disconsolately. “And do you know what each of those drivers is thinking?” Bob Davies asked. “I’ll tell you, their brains are spinning at the thought of how much more their auto insurance may cost them after this crash is all straightened out.”

Beside him in the rear seat, I nodded my head. “I believe you, most people don’t understand how the system works. They assume that submitting a claim means one thing only – that their auto insurance will shoot up – even if they weren’t at fault.”

“You’re right.” It was Harry speaking. “That’s why I sell lots of those ‘claim protection endorsements’. When I explain its purpose to customers, I usually tell them that it’s basically an accident forgiveness policy they can buy for fifteen or twenty dollars. I emphasize that with it, they won’t have to worry about suddenly being hit with a major increase in their auto insurance premium should they have an accident. Most people are surprised at how little it costs.” He gave Fred and me a quick smile. “I’m happy that your esteemed company offers it because it sure makes my job a whole lot easier.” Fred shot a quick glance at the broker sitting beside him in the front. “Glad you like it, Harry. And you’re probably correct when you say that most consumers don’t have a clue about the financial impact of moving down from say, an accident-free six-star rating to a five-star rating…” “…probably correct?” Bob Davies interjected, “my friend, you understate the case. People know more about heart surgery than they do about car insurance and how it works. I can assure you, when you tell a customer that moving out of six-star to five-star for a single at-fault accident could mean a premium increase at renewal of 15% or 20% well, it certainly gets their full attention!”

Harry turned in his seat to face me. “On this point, do you know what I’ve been doing a lot of recently? I’m simply building the cost of the ‘claims protection endorsement’ into my auto quotes. I explain what it is, how it works, and how much it could save them. I don’t get too many arguments.”

Fred nodded in agreement. “It’s a product that meets a real need, isn’t it?”

At this, Harry cleared his throat gently. “Don’t you fellows get too pleased with yourselves over the success of it. Frankly, I don’t think insurance companies in this country are open enough, or frank enough, about what having an accident – involuntary or at-fault – can mean as to how much policyholders will pay for auto coverage in future. That whole subject has always been one huge, mysterious wasteland. And that’s why it worries so many drivers.”

Bob Davies quickly joined in. “Good point, Harry. This whole area of uncertainty winds up giving our industry a ‘black eye’ over and over again. It can come as a really ugly surprise to insureds at renewal time, when they find out what one accident is going to do to their auto insurance premium.” We let this thought hang in the air for a moment. Then I spoke. “Speaking of ugly surprises, I’ve been hearing a lot recently about the effects of our tightening market. Specifically that companies are ‘repositioning their portfolios’ and slicing big chunks of business off their books. Just yesterday a broker showed me a copy of a registered letter that had been sent by a company to a client they’d insured for many years. The insured had one minor at-fault with around $850 of damage, one failure to stop at a stop-sign, and one unfastened seat belt violation. But, because these three incidents occurred within a three-year span – bang! He’s been flat cancelled!”

Harry whistled through his teeth. “Wow! That’s pretty severe.” I nodded, “I think so. But get this, in their letter of cancellation to this man, the company helpfully told him that one of his options would be to get auto coverage through the industry’s Facility Association. Imagine what sort of an increase he’d face there.” There was a grunt from Bob Davies. “There’s a lot of this stuff going around these days. Some companies are looking for handy excuses to prune and reshape their auto business. I’ll give you an example. I got a desperation call from a friend’s son last week. Seems he picked up a careless driving conviction, and within a week of it appearing on his MVR, he got a registered letter of cancellation from his auto insurer. The letter simply said, ‘you no longer fit our risk profile’. In others words, he was dumped in short order.”

“It’s a sign of the times,” Fred said evenly as he accelerated past a huge truck lumbering up the highway. “The good times of the past few years in our business are behind us. We’re definitely into tougher market conditions. It’s only Spring, but some companies already realize they’ll be facing the bottom-line blues come December, so they’re swinging the axe now.” Beside him, Bob Davies nodded. “True enough, Fred. I’m starting to feel price resistance on auto from some of my customers.”

“How do you fight it, Bob?” I asked. He shrugged. “No great magic. Just the usual ways, for instance, higher deductibles. Take collision cover off older cars. But the multi-line discount programs can also come in handy. For instance, if I know I have a client’s auto but not his house, I’ll tell him, ‘look, that auto premium will drop by a hundred dollars if I were to insure your home also’.”

“That’s a good strategy, Bob,” Harry agreed. “With premiums rising, I sell the quality of my best auto insurers a lot more than I might have done two or three years ago. By and large, I think that most buyers look at insurance companies as all offering the same products and all being much the same. So, I take time to point out some important differences that can be of real benefit to them. These days, because a lot of companies are tightening up their programs and cutting back, I sell those insurers which still have a good claims forgiveness policy.” He looked at Fred and me, and tapped the back of his seat for emphasis. “I’m going to give you two company types a free marketing idea. Why don’t you get a bit more aggressive in selling your company’s claims forgiveness program? You still have one of the best on the market but you’re pretty quiet and modest about it. You should be marketing it hard as a strong selling point because most other companies are cutting their claims forgiveness right back – or right out!”

Fred glanced sideways from the road for a second with a quick smile. “Not a bad idea for this market, Harry.” He waved one of his hands towards me. “I hope you’re making notes of all this stuff, Dave!” Then his face turned serious, “what else are you doing these days?” “Well, of course, I quote monthly rates on auto insurance as much as I can,” Bob Davies responded. “There’s nothing new or unusual in that, but it still surprises me when I find a lot of brokers who don’t. I mean, why throw out that big annual dollar figure at a customer when you can make it more palatable as a monthly payment? After all, most people pay the bulk of their regular expenses by monthly pre-authorized check nowadays. It simply makes budgeting easier.”

“And isn’t the retention rate for PAC business much better?” I suggested, and got a quick nod from Bob. “Tell me, my broker friends,” Fred said, as he turned down the side road that led to the golf course. “In this tightening market are you cutting back on the number of personal lines’ insurers you represent, or do you prefer the safety of numbers?” It was Harry who answered first. “I run with more insurers than a lot of brokers my size. I have ten just now. I find you need different companies for different needs, and although the common wisdom these days is to consolidate – because it makes our office admin a whole lot easier – I prefer to have a wider choice. I think it gives me a lot more flexibility.”

Beside me, I could see Bob Davies nodding his head. “I’m with Harry,” he said. “I prefer to have a broad selection of companies. You’ve got some room to maneuver. If your lead company suddenly ups its rates 20%, you have other markets to switch to.” After a moment of reflection, he added, “mind you…it can affect your chances for decent contingent profit commissions. You can’t give all ten companies huge volumes of business, so a couple of sizeable losses with each company can really scupper your chances for a decent CPC. With fewer companies, but bigger volume with each, they’re more likely to give you a break on incurred losses.” As he finished speaking, Fred pulled the van into the golf club’s parking lot. We climbed out, pulled our golf clubs and garment bags from the rear storage, then made our way past a line of gleaming golf carts to the entrance. Fred held the door open for us. “Did you guys realize,” I said, “that golf and auto insurance have one thing in common?” My companions stopped and looked at me questioningly as I delivered my follow-up line, “so long as you drive straight and keep away from the hazards, you can’t get into a lot of trouble”.

As we passed inside, it was Fred’s turn. “Dave’s right, but let’s not forget that they have another thing in common, my friends,” he said with a smile, “a little good luck is also handy”.