I. Introduction
Most of us don’t enjoy having difficult conversations, be it in our personal lives or business.
Most people avoid having difficult conversations and try to work around them without having to deal with the actual issues. The problem with this is that many times we are putting off the inevitable by trying to find solutions that we don’t truly understand or know will work for the other party.
This is apparent in most agencies that I work with when teams would rather remarket a policy rather than have a conversation with their client and take the time to educate them. It’s important that we position ourselves as our clients’ solution to helping them build protection for the things that they have worked so hard to build and insurance is a huge piece of that.
Clients deserve to receive honesty and transparency from their insurance advisors so that they can make informed decisions for their families and businesses.
In this blog, we are going to talk about the importance of having difficult conversations around insurance, explaining rate increases to your clients, and helping you get more comfortable with having meaningful conversations that build trust with your clients.
Yes, it’s uncomfortable but building your skills in this area with some practice over time will make you a great agent that clients trust, they establish your value and you become an important member of their TEAM!
II. Understanding Insurance Rate Increases
It’s important to understand that rates go up for many reasons. Many times we assume because of the current market conditions that rate increase is happening simply because carriers have taken rate and is this true in many instances….YES!
However, we have to remember that this is not the only reason rates increase on policies.
We must dig into the policy and look at all contributing factors:
- What is the claim history?
- Was there a driving activity?
- Did exposures change?
- Were there any policy changes that affected the rate?
Managing our time is critical and in the current landscape, we need to be mindful and protect our time using it for the most impactful items that help to move the needle for our agency.
When we jump into action making assumptions about rate increases without doing the due diligence needed to truly understand the risk we are burning our most precious resource, time!
Let’s take some time to understand how and why carriers take rate increases. As insurance professionals, we need to educate ourselves on this process so we can easily explain the “why” to our clients. Rate increases don’t just happen.
It’s not like our favorite carrier woke up grumpy this morning and decided to change everyone’s rate.
Some of the items carriers consider when determining rates:
- Claims Experience
- Underwriting Profitability
- Economic Factors
- Regulatory Environment
- Reinsurance Costs
- Investment Income
- Market Conditions
- Catastrophic Events
- Loss Trends and Data Analysis
- Customer Retention
Carriers are required to submit rates to the state for approval and notify customers before new rates go into effect. Ratemaking is often complex, and as agents, we rarely have access to the methodology used by carriers.
Agencies can obtain a full explanation of rate increases from their carriers and provide those to your clients, however, this is generally confusing, and a better solution may be asking your carrier for a generic script regarding their rate increase or developing a generic script that is industry-specific and not carrier specific.
Rate increases are impactful to our policyholders as many families and businesses operate on a budget. When rate increases are not planned and our clients are surprised by these changes it can create issues.
This is why being proactive and keeping our clients informed about market conditions can help them plan and adjust their budgets accordingly.
Would you want to know that your insurance premium was going up so you could plan?
- Chat: Question could your team use a plan, scripts, and claims stories on how to explain coverages?
III. Preparing for the Conversation
Using the principle of treating others the way you want to be treated, the right thing to do is to inform our customers and allow them to ask questions and plan.
These conversations may be difficult at first but the right thing is not always the easy thing so let’s pick up the phone and make the call! The first step is to gather the information.
Review the file and determine what is contributing to the rate increase so you are prepared to answer those questions.
Then you want to make sure that you anticipate any common questions and concerns that may come up.
There are many ways we can empower our teams to have effective conversations:
- Role play rate increase scenarios during team meetings
- Provide scripts
- Listen to recorded calls and provide feedback
- Create a list of frequently asked questions and effective responses
Making sure our team understands and can effectively communicate the “why” behind the rate increase will allow them to have productive conversations with our clients and help them build a plan on how your agency is their solutions provider when they happen.
IV. Tips for Explaining Insurance Rate Increases
Communication is key and choosing the right time and place to have these conversations will need to be considered. Let’s not call the client on Friday afternoon at 4:30 hoping they won’t answer and then leave a message about their rate increase on their voicemail.
Find a time that works for the client. When we get them on the phone, be transparent and honest. Don’t apologize for the rate as it makes it feel like you have done something wrong but you did not set the rates.
Do have empathy and educate the client.
Education is our sword against price and we need to be prepared with relatable examples using simple insurance terminology. Insurance conversations can be difficult and confusing. Make your customer feel comfortable and relatable so that they feel that they can express their concerns and ask questions about things they don’t understand without feeling uneducated or silly.
Address your client’s concerns proactively and don’t just ignore them or give vague responses. Discuss options and alternatives around discounts, coverage modifications, and how this will impact their coverage.
Although these insurance conversations can be difficult they establish your value and allow your client to make the best decisions for their families and businesses. This could be adjusting deductibles or coverage limits.
Only after reviewing your client’s policy and obtaining updated underwriting information should we consider exploring different policies or carriers.
V. Handling Emotional Reactions
Insurance difficult conversations many times will create an emotional response in our clients as they are not expecting this news. Although information about the insurance market and rate increases is public knowledge it may be a surprise to our clients.
They may feel:
- Anger
- Frustration
- Confusion
Your role is to be their solutions provider and guide them confidently.
It’s important to remember to:
- Listen Actively: Allow the client to share their thoughts and feelings without interruption. This shows that you value their perspective and are willing to listen.
- Empathize: Acknowledge the client’s emotions and express empathy. This allows them to feel that you recognize and appreciate their concerns.
- Explain the why: This allows the client to understand the necessity of the adjustment to their policy. Although it may not make it easier, being honest and transparent allows us to come to a place of understanding so you can move forward with options for solutions.
- Establish Value: Help the client see the bigger picture by focusing on the protection and peace of mind that insurance policies offer for their family and business.
- Explore Options: Discuss payment options, bundling, coverage options, and discounts. Review these options with the client so they are empowered to make decisions that meet their needs and budget.
- Review their policy: Reviewing the client’s policy with them will allow you to answer any questions they may have and ensure that they understand their options. This also allows you to get a better understanding of their risk as things may have changed and adjustments can be made that may benefit the client!
Keep positioning yourself as your client’s solutions provider and invite them into a plan! Be patient, understanding, and proactive in finding solutions.
Building a positive and transparent relationship with the client can go a long way in managing their emotions and maintaining their trust.
VI. Post-Conversation Follow-Up
After your call follow up with written documentation of the conversation. It’s important to communicate the plan clearly so everyone is on the same page.
Establish the timeline of any actions you will take or additional information you may need from the client. Be sure to document your agency management system of any changes or declinations of coverage so you CYA (Cover Your Agency)!
This will also allow any others in your agency to understand the conversation and answer any questions the client may have if you are not available.
Encourage your clients to ask questions and give them options for communication so they feel comfortable reaching out. Set a time to follow up with them to do a check-in.
Being proactive will help clients feel more engaged and less caught off guard when changes do occur. This will also allow you to monitor satisfaction and obtain feedback that can help your agency be ridiculously amazing!
VII. Dealing with Difficult Scenarios
What about those clients that we just can’t seem to ever make happy? Do you have those in your book? Like many agencies, your answer is YES! You probably have more than just one.
As an agency, you need to determine why and there are normally two reasons here: it’s our challenge or it’s their challenge. As with every challenge there is opportunity here.
We need to look at these situations and carefully understand which of these buckets this falls into.
Is there something truly going on with the client’s account that is causing the persistent issue? Is it a carrier-related issue, is it a policy-related issue or is it a personnel issue within the agency?
When persistent complaints occur, getting another set of eyes on the account to understand what is happening and where the client’s frustrations are coming from is going to be critical to determining the next steps.
Be sure to ask the client for their feedback so you can understand their side of the story and develop a plan to solve their challenge.
When we show our client we care and actively solve their challenges by having insurance difficult conversations we can repair the relationship before it’s too late and they decide to take their business elsewhere.
Sometimes it’s a client issue and you need to be your team’s hero in these instances. This may mean relocating the client outside your agency if they are no longer a good fit and you aren’t in alignment.
When the client no longer sees the value of your agency and can be better served by an agency that may be a better fit then it’s ok to let them go and focus on your customers that are more aligned with your vision.
But what happens when we just get that surprise call from a customer who wants to cancel their policy and it comes as a complete surprise?
Maybe we never even heard from our client that an issue existed, we weren’t proactive in reaching out and now we have to go into repair mode. Ask the difficult questions and be ready to receive the feedback your agency needs to learn so these kinds of challenges don’t come up in the future.
Most agencies make it too easy to leave! We need to be open to receiving feedback and having the difficult conversation around how we could have done better and try and reestablish that trust with the customer and try and save that cancellation.
What we can’t do is simply say “Where would you like me to send that cancellation request for signature?” This will make the client feel like they made the right decision by choosing to leave and it doesn’t help our agency become better by taking the opportunity to learn!
VIII. Conclusion
Open and honest communication is the key to success in having insurance difficult conversations. The more we can be proactive and not fearful of having these conversations the more we build positive relationships with our clients that last.
Remember not to be defensive and see each situation as an opportunity to learn and grow. Many times difficult conversations can lead to better understanding, trust, and long-lasting client relationships.
Pick up the phone and just do it! With practice, these conversations will get easier over time and you may surprise yourself with the respect you will be able to earn from your clients when you treat them like more than just a policy but a human!
