A commodity is defined as a class of goods or services for which there is a demand but which is supplied without qualitative differentiation across a market. We generally categorize things like wheat, corn, natural gas, etc. as commodities. Since little difference is seen in the quality of the commodity, the chief difference is price.
As Insurance Companies move more and more toward direct writing of insurance policies it is to their advantage for insurance to be viewed as a commodity. After all, these insurance companies need consumers to become focused on price because it is one of the few areas where they can compete effectively with the local Insurance Agent.
The fact that Insurance is an intangible product also helps consumers to view insurance as a commodity. When people have to spend money on something intangible, something they do not really want to buy and do not fully understand in terms of value, they are not going to want to spend any more money than necessary. Unfortunately, insurance fits this mold all too well. When it comes to purchasing insurance, most consumers usually do not take the time to understand the difference between one quote and another. They just look at the price.
The consumer often doesn’t understand that not all insurance policies are the same. One quote could provide all risk coverage and another could be a basic form, but the only difference many consumers would see is the price. As well, not all Insurance companies provide the same level of service. Once the consumer makes the decision to purchase, they are relying on the insurance coverage to be there to help when they need it and to offer exceptional claims service. Unfortunately, with insurance companies continuing to reduce staff and closing offices, this type of exceptional service is becoming rare.
Local Insurance Agencies cannot afford to become part of this “commoditized” insurance game. Agencies have the power to bring the value back to insurance by helping their clients break the commodity mentality. Many local agencies are already doing this successfully and growing their businesses through education and using the successful insurance claims experiences of their customers to “sell” the value of their Insurance Agency.
We are pleased to announce our Upcoming Pennsylvania Insurance Agent Continuing Education Class entitled “Using The Insurance Claim Process To Your Advantage” (5 CE Credits). This course will go into much greater detail on this issue and other issues facing Insurance Agents today.
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