Why the cheapest insurance isn’t the best

As a commercial insurance agent, it is tempting to present the cheapest coverage solutions to secure the sale. Business customers, faced with rising costs, will be drawn to the lowest quoted price. It’s easy for both parties to think that choosing cheap insurance will be the path of least resistance. While this strategy might boost sales and confidence in the short term, it has long-term implications for the client and for your agency.

Quoting cheap insurance can be enticing

Clients usually consider cost first. For many, containing costs is a priority, and cheap insurance might appear to be a cost-saving opportunity. As an agent, quoting and binding the lowest cost plan might feel like the easiest way to address client concerns, close the deal, and move on to the next customer. The simplicity of a straightforward “here is the lowest cost” approach can make it very appealing.

Additionally, if other agencies are quoting higher or lower premiums, you might feel pressure to stay competitive and match or beat their quoted coverages. Or maybe your strategy is to start with a low-cost quote and then upsell later. More on how that strategy might damage your credibility below.

Think about what’s best in the long run

Quoting only cheap insurance options creates significant challenges for your agency and your business customers. Here are just a few reasons why:

Insufficient protection and/or coverage gaps

There is a reason for the low cost of quoted coverage. It’s because cheaper insurance plans might come with reduced coverage or higher deductibles, which will not adequately protect your clients in the event of a claim. The business that opts for a plan that excludes key risks or has limits too low to cover significant losses might become very frustrated if a claim arises and the cheap insurance policy doesn’t deliver the expected protection.

Damage to your reputation and credibility

Your role as a trusted advisor is not just about selling policies. The goal is to build a foundation of trust and credibility. They need to know you are acting in their best interests. Quoting only cheap insurance options without thoroughly explaining their limitations works counter to that goal. In the long run, your credibility erodes, and your customers might view you as someone who prioritizes quick sales over their long-term needs. Your retention rate and referrals will decrease as well. Clients who prioritize value over cost are often more loyal and more likely to purchase additional coverage as their businesses grow.

E&O claims against your agency

If your customer suffers a significant loss and finds their coverage inadequate, your agency could face an errors and omissions (E&O) claim. The cheapest insurance plans often come with exclusions or fine print that they may not fully understand. It is your legal duty to ensure they are informed.

Tips to avoid the pitfalls of cheap insurance

Quote multiple plans for affordable and optimal coverage

Don’t just quote the cheapest plan. Leverage the tools available, like the Bold Penguin Terminal, in order to provide a range of options. Different carriers have different appetites, so do your homework on what carrier is the right fit for their risk, all within your customer’s budget. Take the time to discuss the benefits of mid-range or comprehensive plans, showing how they address potential risks more effectively. Your clients will be empowered when they can make informed decisions based on all options rather than just saying “yes” or “no” to a cheap insurance quote.

Educate your clients on the importance of adequate coverage

Lean on real-life examples to illustrate the potential risks of cheap but insufficient insurance protection. Share with them what happens and how a slightly higher premium can save them from significant out-of-pocket costs in the case of a claim. A few minutes of clear explanations of coverage differences can save them from potentially disastrous consequences.

Always focus on building relationships

Continue to ask yourself what is best for building long-term relationships. Understand your clients’ unique needs and risks, and tailor your recommendations accordingly in order to fortify your role as trusted advisor. When you genuinely understand and care for their business and their future, and demonstrate that you are committed to protecting their assets, you’ll earn trust and loyalty. The question should always be, “What’s the best solution for their needs?” and never, “What’s the cheapest insurance option?”.

Avoiding the pitfalls of prioritizing cheap insurance over quality coverage

While quoting cheap insurance plans might be enticing, it’s short-sighted. Insufficient protection could have devastating financial consequences for your customers in the event of a claim. Furthermore, for your agency, making the quick, cheap sale represents missed opportunities for long-term growth, and it increases your agency’s E&O risks. By prioritizing education and building a foundation of trust, you can build stronger client relationships, protect your reputation, and increase retention and renewals.

Contact Bold Penguin with questions about affordable and optimal insurance coverage options, and to discuss how we can work together.