Auto insurance is a regulated industry. It’s important to remember this when cold calling your auto insurance leads because regulators mean business. What’s more, what constituted insurance compliance last year may not be the rule next year.
For instance, New York state regulators have begun eyeing certain factors that large insurers have been using to determine final rates for customers. Here’s the lowdown.
Regulators Are Targeting Education, Occupation Pricing
According to the Wall Street Journal, the Department of Financial Services for New York state is in talks with Allstate, Geico, Liberty Mutual, and Progressive over the use of occupational and educational information in premium pricing decisions.
To be clear, New York regulators haven’t banned this common practice — yet. But they have asked the companies “to explain why [it] shouldn’t be prohibited.”
The issue comes down to a struggle between insurers and consumer advocates. These folks disagree about what data should be used to identify risks and set rates, and what should be off limits.
The Journal observes that insurers have been “winning” this argument. As you know, age, gender, and credit score are frequently used by underwriters to help set client premiums. However, not everyone seems convinced of the overall benefit this creates for millions of consumers. That includes our Wall Street Journal writer:
“Even though the reasons can come down to hypothesizing, actuaries believe knowing an applicant’s job helps them price correctly as well…
“Some actuaries speculate that people with a cautious nature are attracted to certain jobs, and those traits show up in driving. Others think people in more lucrative jobs are more likely to absorb the cost of minor accidents themselves.
“Whatever the reason, people in unfavorable jobs can pay more for their insurance. Reviews by state regulators have found the difference can be in the single- to double-digit percentages.” (Emphasis mine.)
I marked a couple of points there that are worth digging into. Regulators and others seem to be skeptical of actuarial science. When someone hypothesizes or speculates, it can mean they form a theory without first seeing hard evidence. Of course, actuaries are not ones to come up with a theory without evidence! The goal of using data is to formulate the most accurate predictors of loss possible.
The author also focuses on clients with certain jobs that may correlate with higher risks and thus they pay higher auto insurance rates. While this is a point to consider, the aim and benefit of using job data to price premiums is to better assess risks and to save millions of low-risk customers money. By using regulator-approved statistical data models, insurers can offer all customers the best and fairest premium prices possible.
You might wonder how this article and the regulator action it describes affect your business. There are two points worth considering.
Agents Should Be Prepared for Questions, Objections
First, as more press attention is focused on the issue, you may get questions from aged insurance leads in the course of your sales prospecting work. They may come in the form of simple knowledge questions, or they may take the form of stronger sales objections, especially if the insurers you write for use this data to help determine premium costs.
You’re aware of the issue at this point, so you should be prepared if it comes up. Formulate a sales script to deal with these type of questions or objections, and rehearse your answers. Refine your script if you find prospects are not satisfied with your responses.
Agents Should Ask the Right Questions in the Right Way
Secondly, agents should be thoughtful about what information they directly ask of prospects. We often look at the sales consultation as an open-ended conversation with the prospect — conversations can and do go lots of places at the direction of your leads. All the same, be cautious of asking questions that have been ruled off limits by regulators, are not relevant to your job of helping the customer choose an appropriate policy, or that may cause damage to the rapport between you and your prospect and harm your chance of a sale.
When you must ask questions that are personal or may be sensitive areas of discussion, it’s often helpful to frame that part of the discussion. Explain what information is required by the insurer and why. Be sure to explain how such information can be used to offer all customers a price that is both fair and cost effective.
Regulation is something that will always be a part of the auto insurance industry, but it doesn’t have to be negative. Make the most of your opportunity to grow a strong business by staying informed, being prepared for common prospect questions or concerns, and having a goal of providing the solutions that will meet the needs of your clients.
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