Basis of the Business Model

There are a few tenants of modern life that everyone should know and heed. Among them: Change your digital passwords regularly; never hitch a ride with a stranger (unless you know the Uber driver is fully insured); and don’t believe everything you see on the Internet. It’s amazing what you find there. So many websites are out to confuse the public and even lie to them. This year, in order to fulfill my CE credit requirements I took several courses in ethics. Personally, I found them extremely interesting and I think every insurance professional should take at least one ethics course—one per renewal period for our licenses, if applicable. The anonymity the Internet allows makes it too easy these days to stretch the truth to its maximum limits.

In fact, just a couple of weeks ago, our sage and good friend Justin Fries contacted me and a few other PIANY board members about a Facebook ad. The ad, which seemed to target people who browsed the term “insurance,” asks the question: “Are you being scammed by your current insurer?” The ad states that if you drive less than 44 miles a day on average and live in New York State, you may get an extremely high discount. Then, the ad defames agents by saying we don’t tell our customers about this discount because it would affect our commission.

This incensed many on our board, and we started to do some research. We had some of our marketing reps from our respective carriers look at the ad. It seems to link to a website that collects the inquiries and turns them into leads for various insurance companies. We surmised this, because those of us who clicked on the ad and submitted our contact information started receiving solicitations. One of the carrier reps, who participated in our informal research, actually received a response from her own insurance carrier. To say agents who have called me about this ad are indignant is an understatement. Professional, independent agents are honest, hard-working members of our communities. Our predominant business model is based on a foundation of trust, which we hold sacred. If this trust is broken, our livelihoods are put in jeopardy. Never mind the fact that our customers are our friends, family and neighbors with whom we live and communicate on a regular, if not daily, basis — a hard temptation to resist for unscrupulous businesses that don’t have the connections or business model of professional agents.

Here’s another example of dishonesty in the digital age: A friend of mine who is an agent sent me a copy of an email from a major direct writer. In it, a quote is provided and the email states that the company already checked the recipient’s credit, therefore qualifying him for certain insurance. One of three things could be happening here: 1) The direct writer could be buying lists already cleared from one of the major credit reporting agencies; 2) They are looking at economic data for prospects whom they want to approach and then qualifying them on their own (which I believe is illegal because carriers need permission from prospective customers to run a credit check on them); or 3) They’re employing a tactic we’ve discussed in the past, whereby major direct writers will give a quote as if the prospect has a clean record … but upon binding the line, when they run a CLUE report and find a speeding ticket, DUI or undisclosed driver, they raise the rate. I think this is deceptive. Professional independent agents do underwriting up front. I don’t know if you’d call this practice ethical, but I think it’s something regulators should look into.

I don’t know any professional independent agent who would shy away from competition. We are used to tough competition — it makes us better and it allows us to stand out in the end. But, it has to be on an even playing field without deceptive advertising. I’m proud of the role PIANY has played in educating agents about the sophisticated rules to which New York professionals are held. The state has some pretty stringent and specific laws and regulations to which it holds agents. Most of the agents I know are glad that the public can be confident knowing we are held to these standards, weeding out any potential “bad apples” that might give our entire industry a bad name.