Hard market or soft market, when prices go up or down, it’s a perennial problem producers have to deal with. Here are a few tips (with the best one saved for last):
- If the client’s policies are coming up for renewal and you think that price is going to be a problem, find out ahead of time. Then talk about it upfront. Maybe your client doesn’t feel she’s getting proper service, maybe she’s upset about how a claim was handled, or maybe she’s just not pleased with your renewal quotes or what she’s heard on the street about what to expect. It may very well be a price problem, but remove the doubt. Get the problem defined so you know what you’re dealing with.
- If a competitor has quoted a lower premium, and the quote is for coverage and limits comparable to existing policies, anything less than a ten percent savings shouldn’t affect the relationship —if you’re doing a good job of demonstrating your professionalism and added value service. For one thing, you’re a known quantity. If the client switches, there’s a learning curve while new relationships are established.
- Try to put a price on the value of your services. If you’re adding value by communicating regularly, offering valuable advice, conscientiously helping the client review contracts and satisfy insurance requirements and advising him on saving money and reducing risk, ask your client if he has the confidence that the competitor will do as good a job. Does the competitor know the business like you do? If you’re a niche specialist, does the competitor have the depth of experience you have? What’s that worth in the event there’s a significant claim, for instance?
- You may want to discuss the concept of long-term cost, which says that in the long run you really don’t save much money by switching companies. For property/casualty policies, for instance, in some years premiums are high, in some they’re low. In the long run, they even out.
- Finally, the most important way to handle price objections is not to let them occur in the first place. You do this by providing the best products, the best service and earning the confidence of your clients. In a survey of 5,000 buyers of all kinds of products, who commented on the most important qualities they look for when making a purchase, confidence in the vendor ranked first, quality of the product ranked second,selection of product ranked third, service was fourth and price — surprise! — ranked fifth.
The key to avoiding the price objection is to use the “diagnostic” approach as often as you can, especially when quoting new business. Explain how as an insurance professional, you consider yourself a risk analyst and that your strength is helping clients find the best risk solution for their circumstances. Price is important but not likely as important as having a competent, trustworthy insurance professional as their guide. I’ll explain more about how to use the diagnostic model in my next post.