Is personal auto insurance truly a commodity?
Updated: Aug 25, 2020
I can live in Wishful Thinking Land or in reality, and the reality is that because our industry has failed on a thousand levels to educate, or even attempt to educate, consumers that personal auto insurance is not and should not be considered a commodity, it has essentially become a commodity.
It is a shame the industry has made so little effort to educate its consumers that commercials employing idiots who cannot pronounce three syllable words are now effective at selling insurance, much less, imaginary animals and bad jokes. Insurance is a legal contract. Insurance is a complex legal contract. It is wrong to sell a complex legal contract to consumers by making them believe it is such a simple contract that one can trust a person who is obviously stupid.
But that edges toward Wishful Thinking Land. For the few people left in the U.S. who care to educate their clients and prospects as to why personal auto insurance is a complex purchase and therefore should be purchased with an understanding of the options that best fit them, here are a few tips you may want to share.
25/50/25 is not the same thing as 100 CSL. That should be obvious, but I saw an insured fall for this deception. One of those commodity sellers told the insured, "25 + 50 + 25 equals 100!" At the very least, help your clients understand liability limits.
UM/UIM is insurance for you. Many consumers seem to think UM/UIM is for the other parties. I’d argue that in many ways UM/UIM may be more important than liability insurance which is why extra UM/UIM is so important.
Look at it this way, and maybe explain it to your clients like this: There is a reason many people have minimum limits on their auto insurance. Sometimes they are poor and cannot afford more coverage, but quite often their insurance is very expensive because they are really bad drivers and cannot afford adequate, if any insurance. Are horrible drivers more or less likely to be in an accident? Do really bad drivers cause a disproportionate number of accidents? If you believe so, then does it make sense to take extra precautions against these drivers? UM/UIM is the best insurance solution.
Furthermore, if you are middle class and transporting your kids' friends, simply matching $100 or even $500 CSL UM/UIM limits is unlikely to be adequate coverage for a horrendous accident. This is why umbrellas with UM/UIM coverage are so valuable (the fact that some are expensive is for the client to decide -- not the agent).
Does it matter if the policy allows you to choose OEM parts? I was with a mechanic and he was telling me about the frustrations some people have when after market parts are used in repairs. Sometimes those parts do not align or do not look right. Does this matter? Different auto policies have different requirements and options. All policies are not the same.
Some polices are more lenient relative to who can drive vehicles. Does that matter to your client?
Some policies cover trailers and others do not. Does this matter to your client?
These are just five important options and the public needs help understanding them. When a carrier sells policies directly to an insured, caveat emptor applies. The insured is on their own. A good agent can be a hero by helping their clients understand these complex legal contracts so that they can make the right choices. After all, what does common sense suggest? Is it better to take advice from an educated and smart human agent or a cartoon character? Don't let a cartoon character beat you!
(If you want to learn more about how to have these kinds of conversations with clients relative to almost any coverage, commercial and cyber included, please let me know. We have a great program for those agencies who care the most about their clients' protection.)
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand Insurance Education, Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.