I'll pose this for the agents on the forum. Let's assume you have a 45 yr. old non-smoker who wants 20 yr. term and KNOWS he won't ever convert. He wants $250K. All we are concerned about is the rates. Let's also assume he qualifies for standard rates with every carrier.
Here are some of the choices:
Savings Bank Life of MA $ 970
West Coast Life $ 995
Ohio National $1,000
Midland National $1,100
These are all A+ carriers although they do vary in size with West Coast being the largest.
Is recommending a carrier other than the lowest price ethical?
Rick
P.S. I'm only using term insurance because it's the easiest. We could use just about any insurance as the example.
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Training, Community, Support, and Success Independent Life Insurance Agents Assn rick@iliaa.org
Is recommending a carrier other than the lowest price ethical?
I would recommend the carrier I am most certain the customer will get accepted by AND whom I like the best. Of course in health care the choices are limited and there are wide disparites in carriers.
In selling life I would go with my 'gut' feeling as to which carreir should get the business. If all things, and I mean ALL things are equal, I'd go with the lowest price... but I've never seen a case in any sales where ALL things are equal.
There is always some tie-breaker somewhere.
I once recommend a $100,000 printer over a $80,000 printer (these were high-speed Docutech-type machines) because the it was a nicer color and would look better in the customer's office and she would be happier with it.
Of course I presented both prices to the customer (it was a long procurement process... vendor presentation, price haggling, etc.) and she agreed... and was happy with her choice. Of course, I also recognized that the customer wore designer clothes, had a professionally designed office and so that tipped me off that she would want something that 'looked good."
I'm not so sure things are as easy in the financial world, but at the end of the day you just present them all to the client and say why you would recommend what you are recommending and let them make a choice. That's how I would do it.
Some people have analysis paralysis and NEED you to present 3 choices and then pick one and say "This is what you want." (I'm one of those geek-head people! "Just tell me what you like best and here is my check and let me got on with my day. Thanks... and bye." I'm the easiest sale you would ever make (unless I know the products and you are trying to lie to me... then I will turn you from a rooster to a hen in two seconds flat!)
I'll pose this for the agents on the forum. Let's assume you have a 45 yr. old non-smoker who wants 20 yr. term and KNOWS he won't ever convert. He wants $250K. All we are concerned about is the rates. Let's also assume he qualifies for standard rates with every carrier.
Here are some of the choices:
Savings Bank Life of MA $ 970
West Coast Life $ 995
Ohio National $1,000
Midland National $1,100
These are all A+ carriers although they do vary in size with West Coast being the largest.
Is recommending a carrier other than the lowest price ethical?
Rick
P.S. I'm only using term insurance because it's the easiest. We could use just about any insurance as the example.
You have neither an ethical nor a legal obligation to sell a policy at the lowest price provided that you did not misrepresent anything. For example if you told the client that a certain carrier came back as the lowest quote and it was actually the highest then that is another matter. Lots of agents are captive with one company and they sell what that company has whether it is State Farm or New York Life and those are not the lowest term carriers but that is what they work with and what they are offering the client. The client is free to shop around and most do.
Even if you are an independant agent, you are free to present the companies that you want to work with. If the client does not like it then they need to keep checking around. Again, provided that you do not misrepresent anything. Price is not and should not be everything particularly when some quotes group fairly close together. If you have better experience with one company as far as processing time or getting cases through underwriting and you want to do more business with them even though they might be slightly less competitive on price then that is your business and arguably is also helpful to the client as well.
ING, for example, has quoted me low several times and my clients nearly died of old age while going through underwriting and they rated up a couple and I had to go elsewhere to improve it. I don't consider it to be unethical to choose not to go with them even if they are the lowest quote in instances where I think they will frig with me or my client. That is simply how I want to run my business based on my experience. Obviously that is just one example and there are a hundred variations. You get a lower quote from a disability company but it is one that does not pay its claims in your view. Who you going to go with?
Term is the most straightforward example but once you get into long term care and disability etc it is harder and harder to compare apples to apples because the features vary. The emphasis should be on offering a good plan at a good price and one that you fully understand well enough to present and recommend. That may or may not be the lowest price plan available.
" Is recommending a carrier other than the lowest price ethical? "
Yes it can be and sometimes can be the only ethical thing to do.
Cost is not the only issue and never should be. You also need to look at customer service and other issues other than just price. Other issues my include, being able to get in touch with a person at the home office not just a computer. All of them being rated A+ dose not mean they have the same assets to liabilities ratio.
I'd also want to know what company has the best options with keeping the policy in force after the term ends. There is so much more to think about other than just cost, cost is one of the last issues I'll ever look at. They may need to keep this policy longer than the term they may even want to drop it early. We never know today what the needs of the future may or may not be.
They may want to convert it right at the end of the term. They may also want to keep the policy on a year to year basis even after the term ends. We have no idea today what their needs may be 5, 10, 20 or even 21 years from now. I'll also say there is no way he can know he will not want or need to convert it in the next 20 years. He like you has no idea what the future may or may not hold. he may die tomorrow, he may live to age 95. The bottom line is give him the policy you would buy for yourself. You are the professional, you know what the deal is. If you'll treat you clients the same way you'd treat you brother you'll always do what is best for them.
I hope this post will help you some with this issue.
A lot of times I will recommend a company that the client recognizes (like AIG, Genworth) even though it is not the lowest price and everything else is equal as long as there are only a few dollars in difference monthly. A lot of them feels better knowing that they are insured with a company that they are already familiar with.
People do not necessarily want the cheapest. That is why people pay a lot more for brand names even if everything else is equal. Luckily with the insurance world the more known companies are very competitive in price so even if they may be higher in premiums in some cases, it is not such a big difference.
I always tell my clients that I will shop around from different companies but I won't necessarily sell to them the cheapest plan. I will consider premiums, underwriting, company ratings, benefits and name recognition.
Sell them the most expensive one possible. Then the next year sell them the next highest. Then the next year and so on and so on. Keep getting those first year commissions. DUH!!!!!!!
The client wants a 20 year term - period. He's never going to convert. He doesn't need it in 20 years and one day. All he wants is level term for 20 years.
Any company can go out of business and the size of the carrier is not indicative of future performance.
Given the above, is it ethical to recommend the same coverage for $100 a year more?
The client wants a 20 year term - period. He's never going to convert. He doesn't need it in 20 years and one day. All he wants is level term for 20 years.
Any company can go out of business and the size of the carrier is not indicative of future performance.
Given the above, is it ethical to recommend the same coverage for $100 a year more?
Rick
The mere fact your asking tells me that they aren't all the same, at least in your eyes. You have no obligation to provide the lowest price. If you did, it would be unethical to quote things (anything) that wasn't the lowest price, even if you couldn't write it.
If you know the $100 a year extra premium will eventually cause a lapse, then it would be unethical, but I have no idea why you would do that in the first place. If you are basing your recommendation on your commission, then it would be unethical (maybe) if everything else it truly equal.
Of course, you can always present all of the options to the client, with your recommendation, and 90% of the time, they will go with it. It keeps the client from coming back to you about anything.
I write mostly P&C. People are willing to pay a few extra dollars to get a company they know will take care of problems. With life, you don't really have that type of motivation, if they can process a claim, they aren't around to do it. Life claims is easier, no mirror fog, then write a check...
The client wants a 20 year term - period. He's never going to convert. He doesn't need it in 20 years and one day. All he wants is level term for 20 years.
Any company can go out of business and the size of the carrier is not indicative of future performance.
Given the above, is it ethical to recommend the same coverage for $100 a year more?
I understand the wish to make it a clean choice, but I just want to throw out there that most people with term will never want to convert, yet, there might be someone who gets sick in year 19, and the conversion will be a huge help.
In any case, I don't think that there is a moral imperative to sell the absolute cheapest policy, all things being equal. I think that anything within a "reasonable variance" is fine, and everyone needs to decide their own reasonable variances.
A CPA has no imperative to charge the least for doing your taxes, unless he represents that there is no one cheaper.
A lawyer has no imperative to charge the least per hour unless he claims to be the absolute cheapest.
A tire store has no imperative to charge the least unless they claim to be the absolute cheapest.
Likewise, as has been mentioned before, an insurance agent has absolutely no imperative to sell the cheapest policy, even if all things else are equal. The only time there is a problem is if you misrepresent what you are selling as the absolute cheapest.
This "cheapest" stuff is insane. Since when is anyone supposed to sell the cheapest of anything and how is it tied to ethics.
So if I walk into Best Buy ethically they have to show me the cheapest computer? TV? I go to a car lot and ethically they have to show me the cheapest car? My real estate agent is supposed to show me the cheapest house?
You cannot sell anything that's too expensive anyway. So I decide to be unethical, just driven by commission so I'm gonna sell that 30 year old client a $400 a month health plan? Good luck. I'm gonna convince a family of 4 to pay $1,500 a month so I can get a huge commission? Hmmmm, why aren't they returning my calls?
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That is absolutely true. Your first recommendation should be what you and your family have - however that obviously changes due to health concerns and underwriting. Still, I would never recommend a plan I wouldn't put my family on.
He can not KNOW anything. He may think he will never convert. Yet he can not KNOW he never will. Your statement is not valid at all.
He can not know what may happen next week much less 5, 10, 15 or 19 years from now. He may even die next week. He may live 40 more years. Nobody can know what he may want in 15 years. So say so is not a very wise thing to say. I'm sure you understand that point.
What he thinks and what he knows are two different things. Like I told you, give him the same advice you'd take yourself. That is always the right thing to do. You would do what is best for you right? If so well do the same thing for him.
Don't worry about having the cheapest premium. You'll go mad trying to find the cheapest companies. Sell the customer on you and your service and (within reason) price will not be an issue.
Find 3-4 companies where you can meet 90% of the needs you encounter. Place 90% of your business with these companies and don't worry if West Coast Life is seven dollars less.
Never allow a prospect to get you engaged in a bidding war on term.
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