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The strange sacrifices: the insurance industry is too willing to sacrifice good advice to offer the lowest-price products--which might not always be the best products for clients' needs.

The life insurance industry is good at making sacrifices. It seems as if we're willing to sacrifice almost anything--particularly price--to buy business.

Specifically, we're seeing advisers altering their client recommendations for fear that another producer will come and blindside them with another product at a lower price. In such a circumstance, how can anyone possibly expect a consultant to be objective in advising clients? Doing your best for the client has come to have one meaning: getting the lowest price.

As one who speaks with about 40 producers a day, I'm asked one question in fully 80% of these conversations: "Will someone come in with a cheaper product? "While these advisers want to do what's correct for the clients, they worry that being right may cost them business.

We shouldn't be too eager to blame advisers. Consumers are more and more conditioned to ignore all considerations other than price. This is the "Wal-Mart syndrome."

Perhaps it's time to recall what we learned in Psych 101 about "cognitive dissonance," the tendency to tune out anything that's at odds with what we believe. When we believe that price is the most important thing, we easily convince ourselves that all that other "stuff" isn't important. "I don't need all those bells and whistles. This policy seems just about as good. Anyway, I don't understand it all," consumers say. This makes it easy for another adviser to sell a lower-priced product that doesn't meet client needs.

Even the most competent advisers are in an untenable position. They find it prudent to recommend safe, low-cost commodity products.

Then, even more to the point, the fear of competition pushes them to do everything fast even to the point of not asking the important questions. Price conditions consumers to expect everything instantly. If a consultant wants several meetings and comes in with a selection of recommendations, the customer finds someone who will do it now.

Based on my experience, only about 5% to 10% of advisers are true consultants. Unfortunately, many of these are getting close to retirement. Who will be there with the experience, knowledge and commitment to work with the 25% of consumers who need the services of a qualified consultant?

While this may seem like an overly dismal picture, it may just help explain why life insurance sales have been flat for years. We can, of course, blame consumers for choosing what they consider to be the more glamorous equity products. But that's just an excuse.

What we need are advisers who start by understanding the consumer's situation and goals and who design programs with a proper mix of equity products and the protection offered only by life insurance.

As long as we are willing to permit the lowest price to define what we sell and what our customers buy, we may he sacrificing far more than we imagine--the value that qualified advisers bring to their clients.

Ronald D Verzone, a Best's Review columnist, is president of United Underwriters Inc., an Exeter, N.H.-based life insurance broker firm. He can be reached at
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Author:Verzone, Ronald D.
Publication:Best's Review
Date:Apr 1, 2007
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