I Don’t Need or Want Coverage!
As an underwriter and later as an agent, it was always hard for me to understand why consumers weren’t willing to buy “voluntary” insurance to protect them against loss. When I say “voluntary” insurance I am talking about coverage not mandated by law, mortgage holders or others with an insurable interest. Issues like flood insurance, cyber liability, EPLI and various life and voluntary disability coverage to name a few.
I always believed it was simply a lack of responsibility or a desire to not have to spend money on insurance that drove most people’s decision. I now believe there are a number of interwoven factors that lead consumers to choose not to buy coverage, that in many cases they seriously need. But, if you’re aware of the various factors and keep them in mind when dealing with clients and prospects, you will have a much better chance of getting them to see the need and purchase protection. For the purposes of this article, let’s discuss Flood Insurance. Over the last few years, people in New York have suffered through a number of natural disasters that have caused serious property damage related to flooding. You would think that after seeing the devastation, coupled with the inability of the Government to provide financial assistance, people would be flocking to buy coverage. Although more people are exploring coverage, and some are even buying protection, a significant number of folks are not taking action. Here are some of the factors I believe affect their decision:
1. Currently there is a movement by the Insurance Division of the NY Department of Financial Services to make sure carriers and agents/brokers are letting consumers know that there is no flood coverage in their homeowners or commercial property insurance policies. While it is true there may still be a certain percentage of consumers who are unaware I believe there is a much larger group that already understand this and for a number of other factors have chosen not to purchase coverage. If your client or prospect is not buying because of this it is very easy to bring the issue to their attention.
2. I think a consumer’s personal experience has a significant impact on their decision to buy flood coverage. If they, a relative or a close friend have suffered a flood loss then they have a much better understanding of the serious damage that can occur and the horrible impact that damage can have on a family or business. Not having that experience, it’s just a news item they see or read that makes them feel bad for those affected but doesn’t move them to action.
3. Another important roadblock to buying protection is what I call “It Will Never Happen to Me” Syndrome. It is created by a lack of experience mentioned previously and a belief that even though it is affecting others it’s never going to happen to them. Although they see and hear about the devastation there is some type of mental process that kicks in and convinces many people that they will not ever be of victim. They make statements like: “I’ve lived here 30 years we’ve never had a flood loss and I don’t think we will have one in the future.” They refuse to acknowledge changing weather patterns or the distinct possibility that they may have just been lucky so far.
4. Some folks don’t buy coverage because they don’t understand how it covers them. They have heard so many stories about people who had coverage and didn’t get paid for damage they suffered. This is another reason that can be eliminated by having knowledgeable people on staff that can explain the coverage, how it works and what it pays.
5. There are some individuals and business owners that believe if they do experience a loss it will be minor and they can handle it financially. They have a high tolerance for risk and are willing to gamble on the outcome. Business owners, especially entrepreneurs, fall into this group many times because they are risk takers by nature. Your challenge is to get them to see the scope of damage that may occur and how it might exceed their resources. Another tactic is to outline the potential financial loss and how a much smaller premium payment paid now could eliminate a big financial cost later. Although they may still choose to take a chance with their business you may be more successful getting them to see the need when it comes to their home, condo or apartment.
6. The last and probably most important factor in deciding whether to buy coverage is financial. For some consumers the extra cost of flood insurance may have a serious impact on their budget and even be unaffordable in their eyes. If this is truly the case, you will be hard pressed to get them to purchase coverage. The unfortunate thing is that these folks are the ones who can least afford to have a flood loss as they probably don’t have the means to recover. Without some type of Government assistance they very likely will lose their home or business. There is another group of people who can afford the protection but are unwilling to modify their budget and spending habits to commit the funds. No one likes spending money on insurance and they are most likely going to decide to not purchase coverage and use the money elsewhere. Getting them to realize they have the funds and they need the coverage is a significant undertaking. Your abilities as a committed and knowledgeable insurance agent or broker will be required to take them through this process and hopefully get them to purchase the necessary protection.
Remember, although reasons number
3 (“It Will Never Happen to Me” Syndrome) and 6 (money) have the most impact on a client or prospect’s decision, many- if not all- of these factors can be a part of their overall decision. The more independent, third party information you can introduce to support the need for coverage the better. Many people are visually influenced so don’t hesitate to share photos of flood damage that will help them to picture the loss in their minds. People are also impacted by stories. Any real life situations you can present to them about clients or prospects you know and what they experienced will be helpful in making the potential risk real.
I chose to make this article about flood coverage, however as I mentioned in the beginning, this applies to many if not all voluntary coverages a client or prospect needs to consider. Getting clients/prospects to purchase this coverage requires a belief in the product, a commitment to convince them of the need and the perseverance to keep recommending the coverage even after they may have opted not to buy the protection previously. This is what sets independent agents apart from all the other methods of purchasing insurance protection – a real commitment to doing what’s best for their client.
