The Consultative Broker™ Briefing
Volume IX, Number 3
A Free Publication of C.R. Ekern & Company
888.670.1177
www.crekern.com
Copyright, C. R. Ekern & Company, 2007

Beware the Soft Market Pitfall:

The orders are pouring into National Underwriter from brokers and agents who want to secure advance copies of our new book Consultative Brokerage: A Value Strategy.  This book is 225 pages of groundbreaking concepts around Consultative Brokerage®, Total Cost of Risk, Conceptual Presentations and Stewardship Reports. 

If you have enjoyed reading our Consultative Broker Briefing, make certain you order your copy today.  It will take you much deeper into the world of creating and retaining revenue without falling victim to the softening marketplace.  It will give you an entirely new perspective for 2008 and beyond.

And now here is this edition of the Consultative Broker Briefing:

The softening marketplace creates the biggest pitfall in the history of insurance brokerage.  It is the one that costs you and your firm ten’s of the thousands of dollars of income.  It is the one that stops many unseasoned brokers in their tracks.  The one that separates the winners from the losers in the softening marketplace.  Ready?  Here it is.

You have just walked into the office of your best prospect and he tells you, “We are well taken care of this year.”  He goes on to state with some satisfaction, “Our broker is doing all the right things, and we really don’t see what you can do for us.”  “We are well taken care of”, he tells you again, just to make certain you get the message.

How is he basing his judgment of being “well taken care of”?  Why the fact that his premium is going down of course!  Ladies and gentlemen, in a softening marketplace a trained seal can get clients a reduced premium.  That is not how a client should judge whether or not they are being “well taken care of.”

If you accept this, you are falling right into the pit of the softening marketplace.  Unfortunately, you will live there for years to come.  If you believe every prospect who tells you this, you will be misled by prospects who don’t even know the truth.  After all, it has been the other broker who focused them on the price of the transaction.  Are you planning on the other broker helping you?

Here is what a Consultative Broker knows . . .the premium is the smallest part of a client’s costs.  Notice I said costs, not premium.  The additional buyer’s costs are made up of all the indirect and direct loss costs that being absorbed inside the buyer’s business.  The ultimate costs are what make up Total Cost of Risk.

So, even though a buyer’s premium is being reduced by the softening marketplace, isn’t it possible that his costs have actually increased?  What happens to you if you simply allow the other broker to control your prospects by creating the focus on the price of the commodity?  The answer . . .You fall into the “soft market pit” that costs you income.  Unfortunately, some brokers never get out of the pit and eventually wear themselves out trying to climb the wall of falling prices.

Here is how to solve this problem.

1. Expect the “We are well taken care of” pushback.
2. Be prepared to explain the concepts of TCOR and the importance of costs.
3. Obtain the data you need to focus the buyer on his cost structure. 
4. Quantify and demonstrate the impact on the buyer’s financial statement.
5. Refocus the buyer on how much money they are leaving on the table.

So, as the market continues to change, this price pit will continue to grow.  It is imperative that you fill it with value and cost reduction.  Don’t fall into the pit by chasing the other brokers or accepting the “I am being well taken care of” perspective of your prospects.

Best Regards to Consultative Brokers,

Rob Ekern
President
C.R. Ekern & Company

 

 

Consultative Broker Briefing Main Menu

---

Consultative Brokerage® Techniques are utilized by agents and brokers across North America in the development and retention of upper middle market revenues.  The Consultative Broker Briefing is delivered electronically free of charge to selected agents, brokers, and other insurance professionals across North America.  To subscribe to The Consultative Broker Briefing, please click here.

Copyright 2007 C.R. Ekern & Company