Why are brokers most likely to lose a deal?

Why are brokers most likely to lose a deal? | Insurance Business America

Why are brokers most likely to lose a deal?

What are the two most likely reasons why your salespeople will lose a deal?

Price and commoditization, particularly in personal lines, insurance brokers told Insurance Business.

“With 30 years of experience in the insurance sales field, the number one reason people lose a sale is price and second service,” said Rod Larocque, president of Local Insurance Brokers in Sudbury. “There are countless opinions on value, product and pricing. However, in my opinion, if you are comparing a similar product, it all boils down to the price.

“Most corporations today educate their sales staff in advocating a paramount value they add in the offer versus a competitor. However, in the end, 90% of the time the primary deciding factor will be cost.”

A Harvard Business Review blog lists buyer indecision on the top of its list of ‘Top 10 Reasons Salespeople Lose Deals.’ Commoditization and ‘price versus value’ ranked fourth and fifth, respectively.

But commoditization and price consistently ranked as the top two reasons why Canadian insurance brokers are losing deals, brokers told Insurance Business. 

Brokers say they are losing business because of the disparity of costs for between similar home and auto insurance products that are offered by direct writers and the broker channel.

Robbie Wood of W.J. Wood Brokers Ltd. said word travels fast in a small community when broker clients can get a quote from a direct writer for a $1,500 premium and a $2,000 premium quoted by a broker for the same or similar risk.

The average annual car insurance premium in 2012 was highest in Ontario, at $1,878, and lowest in Prince Edward Island, at $649, according to Kanetix, an online risk marketplace.

When brokers do lose out on price, Wood said, it sets up a kind of vicious circle that perpetuates brokers continuously losing out to the direct writers on price.

“For most of the so-called ‘clean’ risks – those people with no tickets, no accidents, no claims, new cars, newer homes – the prices that are being offered by either the group plans or the direct writers are so far removed from those that they are getting from our markets that we’re not even competitive in them,” Wood said.

“Converse to that, those same group plans and direct writers will not tolerate risks that do have tickets, claims, non-payments, so that’s all that’s left in the marketplace for [brokers] to pick up. And that’s where we’re competitive, because no one else will do them.”

However, because the brokers are quoting on the more difficult risks, their quotes are frequently higher than those of the directs, which results in more lost business. Brokers have been losing business to the direct channel at a rate of just under 1% a year for the past several years, according to industry research.