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Want Better Clients? Get a Plan!

We all know that, for most clients, insurance is an intangible item. It’s an emotional purchase. It’s a combination of fear and love wrapped up into a piece of paper (actually a big thick contract that virtually no one reads), which they hope works out when the time comes.

As a new life insurance recruit, I was taught various methods to use in making these “intangible” sales. Most of these methods involved, in one way or another, the following steps: fact-finding to discover a reason to disturb the prospect, describing features and benefits of our products and matching up the two. That’s one way to sell.

Over the years, I moved to a formal advisory approach. Sometimes, this approach is slower, but I experience much better results from it. It may help you as well. Here are two things I live by:

» Selling insurance should be systemized. Using a formal process for all interactions increases your case size, the consistency of the experience and the number of polices sold, while helping clients and prospects better understand the risks they face.

» Create a written insurance policy statement (InsPS). This document increases commitment and clarity for you and your prospects or clients. It’s their document and their decision, and it specifies the choices they made.

The Six-Step Process: Integrating the InsPS

To implement the InsPS, I follow a modified six-step planning process similar to the financial planning process. The insurance six steps are:

  1. Define the relationship. Disclose, in written form, the role of the agent, client and other parties to the planning process (estate attorney, product specialists/wholesalers, life insurance company planning team, etc.). Identify what each party is required to do, compensation and any conflicts of interest.

    By “compensation,” I am referring to how the agent or others are paid, not the actual commission rate, unless you determine your practice should reveal that. It’s your business decision. My suggestion is to explain the way you are paid, so it’s clear and on paper that the insurance company pays you to distribute its product(s), or that you are charging a fee of $___ for X, Y and Z.

    Having it in writing is positive and professional. The same goes for all other service providers, if any. Specify what they are doing in regard to the insurance plan and how they are being paid.
  2. Collect data. Identify goals. Spell out which insurance protection needs are to be addressed and how they will be addressed. What are the objectives to be met?  Is the client able to qualify medically and financially? Is the client health-rated? Does the client have the appropriate cash flow to support the anticipated premiums?
  3. Create an Insurance Policy Statement (InsPS). Once you develop a current analysis based on goals and objectives from the previous step, list the client’s sources of risk and their tolerance of each. Insurance policy statements should identify the client’s risks using “insurance profile characteristics” such as client health, longevity expectations, personal income needs, “must haves” for catastrophic events and so forth. A written statement outlining the coverage needed, existing gaps in coverage and client’s risk tolerance will guide you and your client, as well as direct other advisors who may be working with you on possible solutions.
  4. Develop solutions. The InsPS should detail how much risk to retain and how much to lay off to insurance carriers for each identified risk, and should help determine what level of financial commitment is appropriate. The InsPS should outline ownership structure, i.e., trusts or other entities needed to manage the distribution of insurance proceeds. The InsPS should include non-insurance solutions when appropriate. All the product and design solutions in your final proposal should match the InsPS objectives.
  5. Implement the plan adopted in accordance with the InsPS. This step includes obtaining competitive market quotes for each type of coverage as well as coordinating the client’s estate planning documents and the client’s attorney and/or certified public accountant regarding funding trusts and tax planning objectives. The InsPS helps all the advisory team maintain focus.
  6. Monitor the coverage over time to maintain levels appropriate to current needs. Monitor the performance of the various components of the plan. Continued stewardship of the plan is essential.

A Formal Process: Many Benefits

Compliance. Transparency and compliance in our industry have never been higher. Best practices and suitability standards of care are top-of-mind for regulators and for your back office. Insurance sales regulation is undergoing massive change. Using an

InsPS to manage insurance sales will mitigate the risk of complaints in the future and give you something to fall back on if you ever need it in an arbitration hearing or similar venue. It is a best-practices component.

Referrals. A formal insurance sales process generates more referrals from other advisors. It positions you differently. Recently, an estate attorney asked me to meet with his client to develop an InsPS. After helping them put their personal InsPS in writing, I earned their trust. Now they are using me to look at several insurance product solutions. I know it was the formal process that got me in the door.

Consistency of Client Experience. Most practice management experts will tell you to use a systemized written process with everything you do in order to make your business run more smoothly. Break up work into small, manageable tasks that are repeatable. If you do financial planning now, I’m sure you have a formal process. If you do investment research and advice, my guess is you follow a similar process with every client. Insurance sales should be handled in a similar manner. It makes good business sense.

Try Developing Your Own InsPS Template

My suggestion is to start by developing an InsPS template for your business and to use it for each new client. You don’t have to follow the six-step process if you feel it is unnecessary for your business. For existing clients, use it as a way to update your files. It’s a great reason to meet with them again. You are instituting a new process that will help them better understand what they already have completed with you. It also can generate new business, something we all want to do.

I took a cross section of 20 clients and created a draft InsPS for each based on information I had in their files. Then I mailed them the draft InsPS along with a cover letter and followed up with a phone call. This created 16 follow-up meetings and six new sales. It works, and it’s the right thing to do.

Brent Eugenides, CFP, is founder of BE Financial in Groton, Conn., specializing in insurance planning and consulting for clients and advisors. Contact him at [email protected] [email protected].

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