TREATING THE NEW CUSTOMER RIGHT

10 things to keep in mind

There is an old saying in
insurance that good customer service equals

good E&O loss control.

By Paul Martin, CPCU

Account managers are accustomed to handling a lot of renewals. They follow families as they grow and change, adjusting coverages over the years. However, when a new customer comes along, the agent is faced with many unknowns that can impact how they serve them and build a package of policies to provide the best protection.

Here are ten things agents need to keep in mind when working with a new customer.

1. Find out why the customer wants to switch insurance agents. Understanding what happened to prompt the customer to want to change agencies or insurance companies can be very helpful in guiding the agent to provide the service the customer hopes to see. For example, if they are unhappy with the increasing cost of their upcoming renewal, it can prompt the agent to have a conversation about the options the agency can provide.

This could be a wonderful opportunity to show empathy and begin building a trusting relationship. Perhaps there was an unfortunate loss situation that disappointed the customer. Knowing this could change the type of education you provide about coverages available for purchase and what policies are and aren’t designed to do.

2. Use questions to help better understand what needs insured. Questions uncover the scope of the coverage the customer expects. Let them share details about their home, autos, and drivers that you know will be important in securing the right protection. Feel them out for the levels of deductibles they can tolerate. Ask about umbrella coverage they may have purchased in the past.

The answers the customer provides should lead to additional questions and opportunities to educate them about what an auto policy or homeowners policy will do and can do with optional endorsements.

3. Consider the issues involved in the closing on a home purchase. Most personal lines customers don’t fully understand the impact of the choices they make when purchasing new coverage on a home. For example, often the mortgagee will want the full value of the home insured. While that value may be close to the replacement cost, it also may not, resulting in far more limit than is needed to rebuild the home in the event of a total loss.

In many cities today, the value of the land can represent a fourth or more of the purchase price. For example, there are neighborhoods in some cities that are so valued for the schools and location that what was a 2,000-square-foot ranch built in the 1980s is priced into the millions. The agent should also keep in mind that in many states, forcing a homeowner to purchase insurance that includes the value of the land is illegal. If an agent doesn’t know if this is the case in their state, they should consult the Insurance Code in their state.

It’s also worth remembering that the closing on a home can be a very stressful time for an individual or family. All the changes and decision-making may stress them. Closing dates often change as well based on a wide variety of uncontrollable factors. The agent should work to reduce that stress and be as flexible as possible with what they can control (binders, effective dates, etc.).

4. Don’t forget the impact of discounts and enhancements. New customers will almost always want to do what saves them the most money. But the agent is the one who knows how to get there with their companies. It may be those multi-car, multi-driver discounts. It may be features to their home that get some credits. It might mean double-checking for the correct public protection code to lower the premium in the system.

And each company is different. The premium may be a bit higher for one, but the add-ons they provide could be the difference between a covered and not-covered claim.

5. Always discuss the advantages of an umbrella liability policy. Insurance buyers buy the insurance they feel they must. Particularly if the customers are younger, they may never have considered the value of an umbrella policy. As a wise agent once said, “You don’t have to be a millionaire to be sued like one.”

Catastrophic auto accidents are just one example of claims that can easily reach seven figures to settle. A gas explosion in a home can not only destroy the dwelling but multiple homes on the same street. If the customer owed those kinds of damages to neighbors, what the liability coverage in the homeowners policy will provide could be grossly inadequate.

The agent should also ask about their hobbies or activities—boating, for example, can lead to expensive liability claims for injury or damage.

6. Don’t forget to discuss flood coverage. The National Flood Insurance Program has said for years that 70% of flood claims are made on properties that are not in a “flood zone.” That may be a good sales line, but it is also true.

The agent should recommend the coverage, even if not required by their lender. If the customer rejects flood coverage, and the agent obtains a signed rejection form, make sure the form also addresses the contents coverage provided by the flood policy.

There have been many floods where errors and omissions (E&O) claims poured in afterward because the customer didn’t have flood coverage for their property in a rented space and the agent had no documentation that flood insurance was discussed.

7. Educate first-time homeowners on common misconceptions. Homeowners insurance is not a maintenance plan, but without some education, a new homeowner could believe that it is. Provide a checklist of the things that a homeowner should watch or do to help prevent losses.

Regularly checking the condition of plumbing particularly can help avoid expensive losses but make life less stressful for the insureds. Water heaters, air-conditioning return unit drain piping, washing machine hoses, and leaks from toilets are all things to watch.

Checking for roof damage after bad storms could also make communication with the insurance company better if a claim needs to be made, being able to pinpoint the date of the loss.

8. Be sensitive to the new customer’s budget. Lower premiums are often a primary goal for the new customer. Agents should be sensitive to the fact that not everyone has a similar budget and empathetic with the pressure of higher premiums that come with additional coverage. Sensitivity to the size of the deductible, particularly those for wind and hail, which are often a percentage of the limit, is also warranted.

Questions about how they would finance the high deductible if a claim occurred (savings or credit card, for example) may be helpful to the customer understanding the stakes of making a claim.

9. Don’t assume the premium payment method. Agents should not fear having the discussion about the options the insured can exercise in paying their premium. They may appreciate the discounts that come with full payment.

Conversely, the new customer may be counting on a manageable monthly payment to fit into their household budget. Either way, be prepared to do what is best for them.

10. Document everything. Every agent has a duty to their agency to document the communication that took place at the point of sale with a customer to avoid potential liability should a claim occur that disappoints the customer.

Having new customers come to your agency can be great for your revenue growth and profits, but it could become a headache down the road if the agent didn’t adequately educate the new customer while providing the protection they were looking for. There is an old saying in insurance that good customer service equals good E&O loss control. It is, and if the agent treats the customer great from the outset, they could be a customer for decades to come.

The author

Paul Martin, CPCU, is director of academic content at The National Alliance for Insurance Education & Research headquartered in Austin, Texas. Paul works to develop, maintain, and deliver quality educational programs for the organization. Paul has over three decades in the insurance and risk management industry.