July 6, 2019

Why is My Insurance Agent Upselling me?

Question for my Insurance Agent: Why do you keep sending me offers for insurance products that I do not want? Why are you upselling me?

A Similar Question for my agent: Why do you seem solely focused on selling clients new products?

Both of these are solid questions can be asked of the entire insurance industry: Why do Insurance Agents Focus So Much on Upselling and Cross Selling?

Why Insurance Agents and Brokers are constantly sending you Offers:

Yes, insurance agents do get paid commission and the more products that they sell, the more they make. Therefore its easy to understand why consumers believe that the main focus of insurance agents is to just sell more products and more expensive products. However the reality is far more nuanced and not simply that straightforward. [Just because one product though is more expensive than another does not mean that that has higher commission.]

Upselling can be defined as “a sales technique where a seller induces the customer to purchase more expensive items, upgrades or other add-ons in an attempt to make a more profitable sale. ” Upselling can be separately defined from Cross Selling, which is when a seller ” tries to sell something else,” or another product, perhaps an add on. For the purposes of this article I have opted to use the term upselling to refer to both the primary definition and to include cross selling.

In this brief article, I will review some of the major reason, many surprising for consumers, why Agents are constantly sending off new offers:

Insurance Agents Care:

Believe it or not, your local insurance agent has to put their head down on a pillow at night to go to sleep. Frankly its a lot easier to do this, when they have offered you good solid financial and insurance products. Products that they themselves might use. Knowing that a given client does not have a flood insurance policy when they are in a potential flood prone area, is a real issue.

One of the more frequent reasons that broker and agent upsell you is that they care.

Most People Don’t Really Know what They Need:

Most people have no idea how property and liability insurance works. We all spend countless hours explaining to clients how umbrella liabilities work. The reality is that its our job to educate the public and assist them in making informed decisions. The so called “upsell” in many situations is just a method to further that discussion.

The E&O issue:

One of the most important reasons that good insurance agents send out quotes to you is for Errors and Omissions protection. If and when they offer you a product and you decline, there is a certain amount of protection that comes with that. It is fairly common for clients to say: “I did not know that Earthquake was not covered.” Some attorney suggest suing your agent for failure to provide this. Once we have made the offer, its hard to see that case being successful.

Of course that is not complete protection from all claims. There are all sorts of exclusions to all home insurance policies. Riot, riot is not covered under any/all homeowners policies. So, if your house was burned down during a riot – Can you litigate a payment out of your agent? Well, honestly, who knows. However since there is really no other product that can protect you from this – it is hard to see what the agent did incorrectly.

Errors and Omissions protection remain the number one reason that good solid insurance agents are sending you additional insurance offers.

And Yes a Commission Too:

Yes, most insurance brokers and agents will receive a small commission for every product and every additional product they sell you. So the more money you spend and the more purchases you make the larger their check.

Is this one of they main motivators for all of the cross selling? It probably is.

Agents Prefer the Whole Book of Business:

One last reason that agents are constantly sending over other offers is far more abstract: Great Insurance Brokers Want Your Entire Book of Business. From the homeowners to the auto to the umbrella to the flood and earthquake to the term life and even into your small business. It is far easier to service a consumer when you have it all and even more so when much of it is with the same carrier.

A classic example of this is when your car gets broken into and they take a lot of your personal property from inside that car. Who you gonna call?

It can be fairly common for consumers to forget who has one policy and who has the other. Where does one coverage end and the other begin?

Upgrading Your Insurance Coverage:

One of the more complicated things to do as an insurance agent to to get clients buy a better overall homeowners policy, when they have gotten to the point when they are more wealthy. This type of upselling involves moving to perhaps a more affluent home insurance company, such as AIG.

The reasons for why an insurance broker might make these recommendations are complex and beyond the scope of this article. But in general as you become more affluent more and broader liability and property coverage may be required.

Insurance Upselling, Protecting – Call it What you Want:

Yes, your local or national insurance agent may be upselling you more products – but in general this is a good practice in order to best protect you and your loved ones.