Why there’s no such thing as ‘bad risk’
New leads are crucial for any brokerage’s growth and continued business success.
Although that’s a no-brainer, here’s something to remember when it comes to converting those leads into clients: there’s no such thing as good risks and bad risks.
The idea of a bad risk is a misnomer that can impact how you approach the sale. It’s challenging to stay abreast of what different insurers are potentially labelling as either a good or bad risk. Many of us have likely had moments when we pause to think, “What did our carrier rep say, and was it last quarter or next quarter that info was for, and where are they at with pricing?”
Markets are forever changing their risk models, actuarial teams and the data that comes from them. Then unexpected events happen. The world suddenly changes, which further affects risk modelling.
With so much fluidity, brokers should consider two categories when examining different insurance solutions for clients: 1) coverage that’s been well-priced, and 2) coverage that’s poorly priced.
The term ‘bad risk’ is one way insurance companies talk about profit margins. Either they had enough rate approved and are going to make margin on the client’s coverage, or they aren’t. When it’s the latter, that doesn’t make someone a bad risk. It means the product was not properly priced by the carrier for that individual right now.
Given that companies continuously refile, reframe and remodel (and regularly update their underwriting questions, discounts and more), coverage is really only priced incorrectly for that specific moment in time.
For brokers, every phone call is an opportunity to assist a new client. Once you’ve determined the person isn’t lying or providing fraudulent information, you’re responsible for gathering the correct data so the carrier can calculate the right price for the risk, and then to help the client navigate the insurance-buying process.
Price is only one factor that needs to be considered. If you’re really brokering well, you’re also doing a proper needs analysis of clients’ exposures and helping identify solutions best suited for them. The more insurers you have access to, the better you can provide a strong recommendation based on everything available in the market.
Brokers should absolutely be held to task for inaccurate data and fraudulent clients. These are things you shouldn’t be passing over to your business partners – or encouraging or tolerating at your brokerage.
Insurance companies need to take responsibility for pricing products profitably if they have been supplied with accurate data. Brokers have little to no control over client premiums and coverage costs. So they shouldn’t be held accountable for whether their carriers make enough margin.
There are no bad risks. Treat your leads with the respect they deserve regardless of their history, where they live, or what they’re looking to purchase. Wow them with your service, knowledge, and the work you do to find them insurance that’s priced correctly. That’s our role as brokers.
Adam Mitchell is CEO of Mitch Insurance, a Whitby, Ont.-based insurance brokerage. This story is excerpted from one that appeared in the October print edition of Canadian Underwriter. Feature image by iStock.com/id-work
