The Case for Confronting Fear

Study Shows Policyholders Eager to Address Economic Crisis With P/C Agents

With the parallels being drawn between the nation’s new Administration and President Franklin D. Roosevelt’s Administration during the 1930s Depression, it makes it even more ironic that results from a recent appointment-setting study so poignantly reflect some of FDR’s most famous words: “The only thing we have to fear, is fear itself.”

The escalated, collective economic fear that FDR addressed is one that most will argue has not been felt again — until now. In short, people are scared. They are scared of losing their jobs, their homes and their nest eggs. Many have already lost those things, and all indications are that more will lose them in the future. Fear is driving people to pinch pennies, cut costs and save money, by any means necessary.

But how does FDR’s speech parallel what’s happening in the property and casualty insurance industry? And more importantly, what can be done about it?

A Case for Facing Down Fear

Consider the following study. On Oct. 3, 2007, just as the economic turmoil was reaching a fever pitch, one of the nations’ largest insurers implemented a phone call campaign to offer insurance policyholders the opportunity to meet with a financial strategist as a supplement to a policy review appointment. Unfortunately, just three days later, on October 6, Wall Street suffered the biggest one-day loss since the Great Depression. With client portfolios going up in smoke, it initially appeared that the phone campaign should be aborted. After all, surely no one wanted to talk about finances at a time when millions had just seen their financial futures evanesce.

However, instead of bowing to the presupposed fear that policyholders would be reluctant to talk about their policies (or worse, that clients would decide to try to trim policies to save money during a meeting) the insurance company continued the campaign. Appointment setters for the insurance agents would stand in the face of the fear, and continue placing phone calls.

The first week of the three-month study revealed that the economic crisis was stressful on clients, and policyholders had no interest in meeting with their agent, let alone meeting with a virtual stranger to discuss finances. That was disappointing, but not surprising. Something needed to change.

After reviewing the data, it became clear that the phone call script needed to be modified. Seemingly minute changes to the call script made a world of difference.

By mid-October, appointment setters began using the new script to directly address the economic crisis when calling clients on behalf of agents to arrange for a policy review. The tide swiftly turned, and clients expressed gratitude in being able to vent their frustration. And, the ratio of appointments set for agents began to climb.

The decision to open up the dialogue of addressing clients’ fear, from the moment the call was made, was a sound decision. Agents’ clients reported feeling relieved and eager to have the opportunity to discuss their insurance policies and to receive financial counseling and advisement. And when compared to the lack of appointments being set in September and early October, as the economic crisis was unfolding, the appointment setting ratios had markedly increased.

Becoming Fearless

Knowledge or information is generally accepted to be one of the leading antidotes to fear. As seen in the phone call campaign study, addressing clients’ fear in the current economy has a positive impact for insurance agents. By addressing panic and fear, rather than retreating in the face of the global financial meltdown, agents can comfort clients, thus reducing some of their fear. This is achieved through meetings to review clients’ individual circumstances.

Secondly, the decision for insurance agents to confront their own fears (the fear that calling clients during these economic times may backfire, propelling them to begin thinking about saving money on premiums) is a protective mechanism. Being proactive and reaching out to clients to inform them of changes to their policies, including potential increases in premiums, shows the agent’s willingness to provide knowledge or information. That gives clients a sense of power. In scary economic times, a sense of power is comforting.

Consider that a client’s homeowners’ policy is set to increase, even slightly. Although the fear that the client may decide to defect to a competitor is real, and perhaps even valid, that fear must be overcome. Deciding to reach out to clients prior to a change empowers agents, as well as empowers clients, as they are given warning and are thus prepared. On the contrary, submitting to fear and neglecting to inform clients of changes, only to have them learn of increases via their premium bill, takes clients’ power away and more than likely, results in ire.

Suffice to say, in this economy the last thing any P/C agent or broker needs is angry clients. Angry clients will often defect to a competitor without batting an eye.

To diffuse a phone call that may be seen as delivery of bad news to a client, another study’s results can be used as a guide to overcome agent and client anxiety. The study findings showed that when calls were made to clients offering a policy review, the appointment setting ratio (during time of economic crisis) was 20 percent.

However, modifying the call script to introduce savings to the client — to combat the negative economic news — and inviting the client to join in a policy review, drove the appointment setting ratio up to 33 percent.

Further evidence that savings are the top priority for clients can be seen in the dismal appointment setting ratios when clients were only offered new products with no mention of savings. That yielded an 8 percent appointment ratio. Clearly, this is not the time to be trying to sell new products, without trying to save the clients’ money.

Will offering savings have a negative impact on an agent’s commissions?

Yes and no. It is more than possible that in saving clients money, insurance agents will take a bit of a hit in the wallet. Yet as any successful agent knows, even during an economic crisis it is important to focus on saving money, as well as planning to make money as well. An initial decrease in commission is nothing compared to losing a client altogether. When the economy settles a bit, there will be time to modify policies, sell new policies and update existing policies. That’s when money will be made, if it’s been planned for.

When agents eliminate their own fears, and are able to staunch client fears, what is left to be afraid of? Not much. Consumers will continue to require insurance for their homes. Business owners need insurance for their office space, and drivers need auto insurance. There will forever be a need for professional agents and brokers, and the products they provide. With no end in sight for the demand of services, it is clear at the very least, that the only thing insurance professionals truly need to fear, is fear itself.

Topics Agencies Property Casualty