Insurance Misconceptions: Building Client Relationships Through Insurance Education

By Steve Hicks, VP of Underwriting, PLM

In the wake of recent negative headlines around the industry, public perception of the insurance industry is at a low point. Many home and business owners see insurance as a necessary evil, rather than a valued partner or a critical component in their health and safety, to the point that insurance customers may even be rethinking their policies.

This is a critical juncture for the industry and addressing these perceptions directly with customers is crucial to retaining clients and building stronger customer relationships. To start this process, producers should take time to educate their customers on the real value of an insurance policy and address the many misconceptions that have contributed to the industry’s complicated reputation.

Addressing misconceptions

Producers seeking to address the industry’s misconceptions and better support their clients should focus their efforts on a few key points impacting insurance’s reputation. These include:

• Insurers are raising rates without cause: Rates and premiums have steadily risen over the past half-decade and many consumers have voiced concerns with these increased costs, connecting it with a desire for profitability on the part of insurers. The truth is the cost of claims has never been higher.? Reconstruction costs soared during the pandemic and have not fallen. What was once coined social inflation, but is truly legal system abuse, has caused casualty claims costs to skyrocket. Nuclear verdicts, third-party litigation funding, jury anchoring, these things raise costs for all of us. Throw in regulatory factors and the increase in frequency and severity of natural disasters, and the necessity of increased premiums becomes a bit more understandable. Producers should explain this to their clients to show how premiums help insurers honor their commitments to the customer.
• Insurance isn’t worth the cost: Self-insurance has become a more popular topic in recent months, but business owners are likely not aware of how expensive it can be to self-insure. Producers can explain to their clients that with self-insurance, business owners need to set aside enough capital to ensure they are covered in the event of the loss. They also are responsible for all the back-end work of claims processing – everything from filing paperwork to hiring attorneys and defending lawsuits. Not only is this expensive, but it also ties up resources that could be spent on growing the business.
• Insurance is a set-and-forget expense: Insurance to value has been a significant concern across industries in recent years. Some customers believe insurance is a one-time purchase and do not realize they need to update inventory lists and any major changes to operations with insurers to confirm their business is properly valued. This can lead to sticker stock in the event of a claim. Producers can help clients avoid this issue by explaining the importance of regular communication with the insurer or producer whenever there’s a change to business.
• Insurance is just a policy: Insurance is much more than a policy. A good insurer offers a range of tools that can protect home and business owners. Policyholders are often unaware of the comprehensive risk mitigation and loss control services our industry offers. Producers should frequently reach out to clients to proactively offer safety insights. For example, ahead of the winter, provide consumers with advice for winterizing their businesses and ensuring walkways are safe for customers.

Another common misconception is that the insurer with the best price or most convenient office is the best to insure your business. For niche businesses, a specialty insurer can bring unique value to the process. In the lumber industry where my employer, Pennsylvania Lumbermens Mutual Insurance Company, spends its time, our expertise across the wood and insurance industries has proven incredibly valuable to clients. We can provide customized risk mitigation tactics and policy advice to ensure lumber businesses can address their unique risk exposures, from fires to electrical safety issues.

Addressing misconceptions around the insurance industry and educating clients can be a valuable tactic for producers in their efforts to enhance customer relationships. Proactive producers who prioritize insurance education will find happier clients and better results ahead.

About the author

Steve Hicks, MBA, is the vice president of underwriting at Pennsylvania Lumbermens Mutual Insurance Company (PLM). PLM is a nationally recognized property and casualty insurance carrier serving the lumber, woodworking and building materials industries. Email Stephen at [email protected] or for more information on PLM visit plmins.com.