District Eighty-Six 2000 by accinent


									The Risk
Approach to
Insurance Sales
      Improve Sales
      and Retention
      when the
      Market is Up
      or Down!
Risk Management-based Sales

The insurance market is more competitive now than it has ever been. Direct Writers, 800
numbers, the Internet and our traditional competitors are all fighting for market share.
Every hour of every day, attacks are launched against us in radio, TV and print ads and
the weapon of choice is price. This is a battle we will lose if we try to fight price with

Fortunately, we have a better weapon. We call it Risk Management-based Sales and it
is the most effective defense against the marketing efforts of 99% of the insurance
companies and agents in California. Risk Management-based Sales will get you in front
of more prospects, give you a higher close ratio and increase your policies per
household. This approach gives you a fighting chance regardless of your prospect’s
current premium or insurance carrier.

Perhaps best of all, Risk Management-based Sales lets you be the agent you always
wanted to be: a professional risk manager, an advisor, a counselor, respected for your
ability to protect your clients’ assets and financial well-being.

Although the philosophy behind Risk Management-based Sales may be new to many
agents, the basic elements will be familiar and easy to implement. The biggest challenge
will be to realize that the value of the products you sell is not based on price—the value
is based on you and your skill as a risk manager.

Presented by Hugh Seagreaves, AAI
Written and compiled by David Dutcher, JD, CPCU

Risk Management-based Sales

The basic philosophy behind Risk Management-based Sales grows out of our decision
to be risk managers rather than just salesmen or order-takers. You may be thinking to
yourself, “So what,” but you’ve overlooked our first secret weapon: Whenever we go on
a sales appointment, we make sure our clients are properly insured, regardless of whom
they buy from.

That’s right! Our main goal is to make sure they have the right insurance program with
no gaps or overlaps. As risk managers we don’t look at price, we look at coverage. It is
amazing that something so obvious can still be a secret. This is still a secret weapon
because almost every agent out there has been suckered into selling insurance based on

As risk managers we can move past the issue of price and become a trusted advisor or
counselor. This aligns us with our client’s interests and we earn the right to review all of
their insurance needs. At the same time, we can avoid the resistance normally associated
with the traditional sales approach.

Now add our second secret weapon, Policy Packaging, and you’ve got a great one-two
punch. Policy Packaging bundles policies into one proposal with one price. This lets
your client see you as their primary source of insurance and makes it much more
difficult for the customer to shop your proposal. It also helps you remain competitive by
using low rates in one line to make up for less competitive rates in another line.

You are now ready to look at the nuts and bolts of Risk Management-based Sales.

Risk Management-based Sales

The Two Appointment Sale
Risk Management-based Sales are made over the course of two or more appointments.
The first two appointments are for property and casualty. You then go back and follow
the same steps for a life presentation conducted over two additional appointments.

The first appointment is designed to:
       Establish Credibility
       Create Vulnerability
       Gather Information

The second appointment is similar to the first:
       Re-Establish Credibility
       Re-Create Vulnerability
       Provide Solutions

If you are not able to cover all aspects of a client’s insurance program in two
appointments, you may add more appointments as necessary.

Risk Management-based Sales

The First Appointment
 Establishing Credibility

Credibility is defined as the quality of being believable, reliable or worthy of belief.
Unless you can establish your credibility, nothing else you do during the first or second
interview will be worth anything. Therefore, you must establish your credibility at the

Naturally, everything you do and everything you don’t do will affect your credibility in
the eyes of your customer. How you look, how you sound, even how you smell, all
affect your credibility. For the purposes of this training, we will confine our discussion
to what you say and how you say it. More specifically, we will focus on the initial
portion of your first appointment presentation: The Positioning Statement.

The Positioning Statement communicates who you are and what you believe. It is your
opportunity to make a positive first impression and to present yourself as a professional
risk manager. The Positioning Statement also helps you prepare your customer for the
way you do business and eliminate objections before they arise. Best of all, it lays the
groundwork for an evaluation of all the customer’s insurance needs, not just the need for
auto or home insurance.

Everyone will have his or her own Positioning Statement. However, we recommend
that you start with ours then modify it to suit your needs as you gain greater confidence
and success. The most important thing to remember is that the Positioning Statement
must be delivered with sincerity and conviction. If you don’t believe what you are
saying, you won’t have the credibility needed to make the sale.

Our Positioning Statement has five elements:

      What is Farmers?
      The Farmers Agency Concept.
      When you have a claim.
      Risk Management Approach.
      Policy Packaging.

Risk Management-based Sales

Positioning Statement Script
 What is Farmers?

“What do you know about Farmers?

 “In 1928, Farmers started out by selling insurance to Farmers and Ranchers here
in California. More than 70 years have gone by and Farmers has grown to become
one of the top three all-lines writers of insurance in the country.

“What’s a “line” of insurance? A line of insurance is a category of insurance, like
auto, home, business, workers compensation, life or retirement.

 The Farmers Agency Concept

“One of the reasons we’ve grown has to do with our agents. Farmers is set up so
that agents own and operate their own agencies. As a Farmers agent, I own my
agency. We do this because this is the best way to make sure you get the best
possible service from someone who has an owner’s interest in your business.

 When you have a claim

“Let me give you an example: If you had an auto claim and your car was damaged,
you would call me and I would send you to our Circle of Dependability repair
facility where they would have full authority to repair your car. When you pick up
your car, you will receive a guarantee covering the repairs for as long as you own
your car.

“If your home was damaged, you would call me and we would send a crew over to
clean up the mess and begin repairs.

“You see, our goal is to over-deliver on our promise to get you back where you

Risk Management-based Sales

Positioning Statement Script (Continued)
 Risk Management Approach

“Tonight, my job is to be your risk manager. What does that mean? That means
I’m your eyes and ears for risk. I will identity areas of risk that concern your assets
and your family’s financial well being. I will then prepare solutions for you to
choose from. And one of those choices may be to not go with Farmers!

 Policy Packaging

“You should also know that Farmers uses a concept called Policy Packaging. If we
can risk manage you and put together a complete insurance program, we have
more premium to work with and this lets us give you more discounts. Our goal is to
bundle your policies into an insurance program that is done right, with no gaps or
overlaps, at the lowest possible cost.

Risk Management-based Sales

The First Appointment (continued)
 Creating Vulnerability

After you have established your credibility with your Positioning Statement, you must
create a sense of vulnerability in your customer. The tool that allows you to do this is the
Client Service Folder and the dialogue that it will generate between you and your

Vulnerability is defined as the condition of being open to injury, attack or loss. Your
goal is to expose your customer’s vulnerability to loss. This vulnerability comes from
either the client’s limited understanding of insurance concepts, their underestimation of
the potential for loss, or a feeling of being taken advantage of by the insurance system.
By making the client aware of their own vulnerability, you make them receptive to your
service and your solutions.

Here is a sample Client Service Folder lead-in script:

“One of the tools I use to make sure I make the proper recommendations to you is
our Client Service Folder. It will help me gather the information we need to create
the right insurance program for you, one without gaps or overlaps.”

Begin asking questions.

Risk Management-based Sales

The First Appointment (continued)
 Creating Vulnerability (continued)

Personal Information

Open your new Client Service Folder and begin gathering your client’s personal
information. Although you do not need to fill in all the blanks, keep in mind that in sales
the one with the most information usually wins. Also, getting all the numbers now will
often save a follow-up phone call later. Don’t forget e-mail addresses!

Social Security Audits.

Ask the customer if they have audited their Social Security Account within the last three
years. Most people will say “No” and have never thought of it before. By explaining that
the Social Security Administration only agrees to go back three years to correct
retirement account errors you create a sense of retirement income vulnerability.

Offer to request a Social Security earnings report and/or review any such report the
client will receive.


Your next question is about your clients’ will(s). Do they have one? If so, when was it
last updated? Again, your goal is to create a sense of vulnerability. This time, you want
to show how your client’s family and estate are vulnerable to loss at the time of death.

Ask them, “Do you want to control what happens to your family or do you want the
state to make your decisions for you?” You may also point out that in California it
takes almost two years, on average, to probate an estate without a will. If they don’t have
a will, tell them you will bring a simple will with you on your next visit. If they already
have a will, you can bring the card of an estate planning attorney.

Risk Management-based Sales

The First Appointment (continued)
 Creating Vulnerability (continued)

Reviewing Coverage and Asking Questions

It is amazing how little most people know about insurance. Most people hate insurance
companies, premiums, contracts and agents so much that they never know what
coverage they have or need. Even professional people including attorneys and CPA’s
fall into this group. The funny thing is, these people think they know more than they do.
Your goal is to gently expose their ignorance (vulnerability!) while offering your
professional assistance (credibility!).

Start by asking to see your client’s insurance papers. Don’t give up when they tell you
they are happy with their current carrier or you couldn’t possibly beat their current
premium. Just say, “That’s great! But remember, my job is to be your risk manager
and to review all of your coverage to make sure it’s done right and make sure you
have the coverage you think you have.”

The following pages contain sample scripts and information that you can use to walk
your client through a review of their auto, home and life insurance programs.

Risk Management-based Sales

Auto Review
 Liability and Uninsured/Underinsured Coverage

Turn your client’s insurance face sheet toward him, point out the liability limits and say,
“John, tell me what you understand your liability limits will do for you.”

Let your client talk. Don’t be too quick to jump in with an explanation. Remember that
your goal is to create vulnerability.

When your client is done speaking, provide your explanation of liability coverage and
tell a quick story about what would happen if your client were to cause an accident. For
example: “You’re a good driver. But one evening, coming home from work, you
reach over to tune the radio and BAM! You hit your neighbor’s child. How much
do you owe?”

Now you do something we call “Peeling the Onion.” Point out all the things your
client’s limits will need to cover: Ambulance, emergency room, tests, surgery, ICU,
hospital room charges, other medical expenses, home health care, rehabilitation, lost
income, pain and suffering and death benefits. Emphasize the high cost of bodily injury
claims and defense costs. (See the Bodily Injury Cost Estimate on page 12.)

“Did you know the median litigated death claim in the U.S. is almost $600,000?
This is a 102% increase since 1992. And awards in California are higher than the
national average.” (USA News and World Report)

Now ask your client, “What will your policy limits pay?” If you have chosen your
examples correctly, the client’s limits will not be sufficient to cover the hypothetical

Risk Management-based Sales

Auto Review (continued)
 Liability and Uninsured/Underinsured Coverage (continued)

Ask your client, “Where will the money come from to pay for this claim? Will it
come from the equity in your home, your rental property, savings, investments or
your current/future income?”

“Keep in mind that in California, up to 50% of your wages can be attached in
order to satisfy a judgement or claim. Even a spouse’s wages can be attached. And
the obligation cannot be discharged in bankruptcy.”

For example: If a husband and wife earn a combined annual income of $60,000, their
exposure is $30,000 per year until they retire. Assuming this couple was in their 40’s,
they would have an exposure exceeding $600,000 based on their income alone!

“Retirement accounts: They’re protected now, but become vulnerable as soon as
you begin receiving benefits.”

Continue by saying, “John, don’t you agree, your per person auto liability limit
needs to equal your asset base?”

Now move onto UM/UIM coverage. It is the same as for liability coverage. Begin by
asking your client to “describe what Uninsured and Underinsured Motorist
Coverage does.” Make sure your client realizes that his assets are exposed not only
when he is negligent but also when others carelessly or recklessly endanger him or his

Share with your client a copy of the Bodily Injury Cost Estimate and begin to fill out the
Income and Asset portion of the Client Service Folder.

Risk Management-based Sales

Bodily Injury Cost Estimate
Dominican Hospital of Santa Cruz, California provided the estimated medical costs
listed below to Hugh Seagreaves, District Manager for Farmers Insurance.

The average hospital stay for a victim of a moderate auto accident in Santa Cruz
County is 14 days. The average cost per day is $2,700.

Ambulance Expense ......................................................................... $900.00
Hospital Expense (14 days X $2,700) ......................................... $37,800.00
Physicians Fees, Rehabilitation, X-Rays, etc. ........................... $15,600.00
MEDICAL EXPENSE SUBTOTAL ......................................... $54,300.00

Lost Wages (based on an annual income of $50,000)
$960 per week X 8 weeks .............................................................. $7,680.00
SUBTOTAL ................................................................................. $61,980.00

General Damages (i.e. Pain and Suffering)
(Using a multiplier of 3 to 5 times the
medical and wage expenses) ..................................................... $185,940 – $309,900

TOTAL (per claimant) ............................................................. $247,920 – $371,880

Your Policy Will Pay ................................................................. $

                        Where will you find the money?

Risk Management-based Sales

Auto Review (continued)
 Medical Coverage

With your client’s insurance face sheet still turned toward him, point out the medical
limit(s) and say, “John, tell me what your Auto Medical coverage does for you.”

After letting him respond, continue to educate your client about his coverage. Explain
that this medical coverage is often duplicated in other areas (e.g. his health insurance
coverage, liability and UM/UIM coverage). One option is to remove, reduce or modify
the medical coverage in order to free up money to be used were it is needed more (e.g.
liability coverage, UM/UIM, etc.)

 Comprehensive Coverage

Moving on to Comprehensive Coverage, say, “John, tell me about your Comp.

Explain how Comprehensive coverage covers everything except collision, rollover and
normal wear and tear. Introduce the concept of using higher deductibles since insurance
is really designed to protect your client from large losses he can’t afford, not small
losses he can afford. Self insuring for a $500 comp loss is more prudent than self
insuring for a $1 million liability or UM/UIM claim.

 Collision Coverage

Stay on track and ask, “What does your Collision coverage do for you?”

Once again, explain the coverage and reinforce the concept of using higher deductibles.

 Optional Coverages

When you explain Loss of Use, Towing and Road Service, Residual Debt Coverage,
Glass Buy-back, etc., tell a story involving one of these claims and ask, “If this
happens, do you want Farmers to pay?” They’ll usually say yes. Wouldn’t you?
Risk Management-based Sales
Homeowner Review
 Transitioning to Homeowners

Once you’ve completed the auto review, simply ask to review your client’s home
coverage. If they protest, saying they only wanted an auto quote, say, “Mr. Jones, if I
only looked at your auto coverage would I have done my job? Remember, my job is
to be your eyes and ears for risk. If one, two or ten years from now you were to
come home to find your home burned to the ground and your insurance won’t pay
enough to rebuild, did I do my job?”

 Dwelling Coverage

Turn your client’s insurance face sheet toward him, point out the dwelling limit and say,
“John, tell me how you think your Dwelling coverage works.”

Educate your client by explaining the four types of Dwelling coverage found in today’s
insurance contracts:

      1. Fair Market Value of the home at the time of loss (includes depreciation), up to
         the policy limit.
      2. Replacement Cost (without depreciation), up to the policy limit.
      3. Extended Replacement Cost, up to a specified amount over the policy limit.
      4. Replacement Cost with Building Code Upgrade Coverage.

Name the eight common exclusions found in today’s homeowner package policies:

      1.   Landslides
      2.   Wear and Tear
      3.   War
      4.   Nuclear Hazard
      5.   Vermin or insects
      6.   Back-up of sewers or drains
      7.   Earthquake
      8.   Flood

Risk Management-based Sales
Homeowner Review (continued)
 Dwelling Coverage (continued)

Tell your client he can buy back two exclusions: Earthquake and Flood.

Say, “If there was a 7.0 earthquake and you rushed home to find your home in
almost perfect shape, except it was 20 inches to the right and off its foundation,
would you want Farmers to pay?”

“If there was a heavy rain and a drain backed up and water ran over your patio,
under your sliding glass door and into your living room. Would you want Farmers
to pay for the rug and floor repair? That’s flood damage and it’s not covered under
your homeowners policy.”

Now gather the information needed to calculate the dwelling replacement cost and
remember to ask if they own any other property (rentals or vacation homes) that needs
Dwelling coverage.

Risk Management-based Sales

Homeowner Review (continued)
 Separate Structure Coverage

With your client’s insurance face sheet still turned toward him, point out the separate
structure limit and say, “John, tell me, what do you think Separate Structure
coverage is?”

After letting him respond, continue to educate your client about his coverage. Explain
the need to insure to value and to include the value of driveways, retaining walls,
outbuildings, fences and irrigation systems.

 Additional Living Expense Coverage

Moving on Additional Living Expense coverage, say, “John, do you know what
Additional Living Expense coverage does?”

Continue to explain and educate.

 Contents Coverage

You’re doing fine. Now ask, “What does Contents coverage mean?” Then ask,
“What’s the difference between Replacement Cost and Actual Cash Value?”

Remember to ask about target items: Jewelry, Guns, Cameras, Money, Furs, etc. You
will often find that your client has no idea coverage for these items are subject to sub-
limits in their policy. Ask, “If you came home and found all of your jewelry had been
stolen, how much would you lose? Would you want Farmers to pay?”

 Guest Medical Coverage

Ask, “What does Guest Medical mean?”

Continue to explain and educate.

Risk Management-based Sales

Homeowner Review (continued)
 Liability Coverage

Continue by asking, “John, we’ve already talked about your Auto Liability
coverage, now tell me what you believe your homeowner liability limits will do for

Just like you did in your auto review, provide your explanation of Liability coverage and
tell a quick story about what would happen if your client were to negligently cause
injury or property damage. This time, talk about all the reasons he or his family could be
sued for things they do on or off the premises. Remind your client that his homeowner
limits will need to cover medical expenses, rehabilitation, lost income, pain and
suffering and death benefits, just like his auto limits.

Now ask your client, “What will your policy limits pay?” If you have chosen your
examples correctly, the client’s limits will not be sufficient to cover the hypothetical

Again, ask your client, “Where will the money come from to pay for this claim? Will
it come from the equity in your home, your rental property, savings, investments or
your current income? Keep in mind that in California, up to 50% of your wages
can be attached in order to satisfy a judgement or claim. Even a spouse’s wages can
be attached. And the obligation cannot be discharged in bankruptcy.”

Continue by saying, “Again, John, don’t you agree, your homeowner liability limit
needs to equal your asset base, just like your auto coverage?”

 Risk Management-based Sales

The Second Appointment
Your work during the second appointment is very similar to what you did during the first
appointment. Now, instead of gathering information you will provide solutions and ask
for the business. Here’s how it looks:

      Re-Establish Credibility
      Re-Create Vulnerability
      Provide Solutions
      Ask for the Business

 Re-Establish Credibility

Start your Second Appointment with a review of your Positioning Statement. Be
consistent and use an abbreviated version of your First Appointment Positioning
Statement. Emphasize the things that seemed to most interest your client. The most
important topics are your Risk Management Approach and the Policy Packaging

 Re-Create Vulnerability

After you have re-established your credibility, “re-peel the onion.” Remind them of all
the things their liability coverage must pay for. Most importantly, make sure your
client agrees that their liability coverage must equal their asset base (including
future earnings)!

Risk Management-based Sales

The Second Appointment (continued)
 Provide Solutions

Once you have created a sense of vulnerability, you will want to present your insurance
solutions. (Keep in mind that some risk exposures cannot be covered by insurance. In
those cases you should still discuss the exposure and propose non-insurance solutions
such as risk avoidance, reduction and prevention.)

Your insurance solutions will come in the form of a proposal, often referred to as a quote
or sales presentation. There are many different presentation styles, one of which we have
included in this booklet. There is no magic in these presentations. They simply re-format
the quotes you generate from the Farmers Computer Network into a document that has
greater sales potential.

The most important thing about these presentations is how they Package Policies.
Instead of showing coverages, policies and prices separately, they bundle them into a
unified risk management package.

Packaging does three things:

 First, it helps the customer see you as their primary source of insurance, an expert
  who makes sure they have no gaps or overlaps between all their different policies.
 Second, it makes it more difficult for the customer to shop your proposal based on
  the price of one line of coverage.
 Third, it helps you remain competitive by using low rates in one line to make up for
  higher rates in another line.

Walk your customer through your solutions. Show them how your proposal will help
eliminate their vulnerability and give them peace of mind. Get agreement on each
element of coverage by asking “Does that make sense?” or “Do you agree?” Only after
you have done this will you talk about price.

Risk Management-based Sales

The Second Appointment (continued)
 Provide Solutions (continued)

If they try to interrupt you by asking, “How much will this cost” don’t get flustered.
Tell them, “It can cost a lot to do it right. You may not be able to afford the
coverage you need” and move on. Show them you’re more concerned about protecting
them than you are about making a quick sale. Besides, your actual monthly premiums
will usually be lower than they imagine.

Sometimes, your client will ask, “How much is the auto coverage by itself?” Tell them
you don’t know and remind them about policy packaging. Tell them you can’t pull the
auto portion out because it’s part of the package rate. Suggest a comparison between
their current monthly insurance expense (for insufficient coverage!) and your proposed
monthly premium. If your coverage is more expensive, ask them, “Is it worth $20 a
month to do it right?”

 Ask for the Business!

Remember to ask for the business! Today’s customers depend on creative agents for
ideas, suggestions and solutions to their problems and they are willing to pay for them.

Feel fortunate if your client says, “I want to think about it.” This is a great chance to
deal with objections. Ask, “What is it you want to think about? What have I not
made clear?” Go back over asset-based liability limits, and all the individual coverages
and deductibles. Get their agreement on everything. You may want to finish by saying,
“I think this is the right program for you. I think we should bind this coverage

If they still want to think about it, ask them, “Is it the price? O.K., we’re $20 more and
we did say doing it right might be unaffordable. Is $20 more unaffordable? Here’s
my fear: Next year or 10 years from now you have a loss and now all your assets
are on the table. You call me and ask how much it would have cost to do it right.
Will you think it was it worth $20 a month then?

Risk Management-based Sales

The Second Appointment (continued)
“I’ll start coverage today, but we won’t cancel your current coverage until your
new policies issue.”

If they are ready, continue by having them sign the subscription agreement(s), EasyPay
agreement and the letter you use to cancel their existing policies. Then, when they are
comfortable signing their name, say, “All I need now is a check for . . .”

Risk Management-based Sales

The Second Appointment (continued)
 Additional Sales Tips

    NEVER do “apples to apples” quotes. If you do, all that is left is price and that’s
     the wrong battlefield.
    Avoid phone quotes. They eat up your time and diminish your role as a risk
    Don’t be afraid to cost more. YOU, and the insurance program you recommend,
     are worth it!
    Use monthly premium costs to show how little it costs per month to add
    Use level deductibles to keep your clients honest. This will avoid disagreements
     over what deductible applies.
    Use umbrella policies to increase your product density and set yourself apart from
     many of your competitors who don’t offer umbrellas.
    If the client cannot afford the package you have proposed, help him choose which
     coverages to eliminate, that way he feels in control.
    If there is no earthquake policy in force, sell the coverage in story form:
            “John, if you came home and a 7.4 earthquake hit our community and
            your home slid off its foundation causing $100,000-worth of damage,
            would you want Farmers to pay?”
    If there is no flood policy in force, follow the same format as for earthquake
    When your clients have a lot of assets exposed to loss, higher deductibles can
     save money that can be used to purchase more liability coverage.

Risk Management-based Sales

Life Insurance
Now that you are through the P&C portion of your sales process, it’s time to transition to
Life, and it’s much easier than getting the first appointment!

At the end of the second property and casualty appointment (whether or not you got the
business!), you set a follow up appointment to prepare a will. Tell the clients to think
about who they want to name as their Personal Representative(s) and guardian(s) for
their children. Also, tell them the next meeting will involve the ordering of a Social
Security earnings statement and the completion of a life insurance needs analysis.

Go back on the appointed day and take with you a will and Social Security earnings
statement request form. Simple pre-printed wills are available from your local office
supply store. Social Security earnings statement order forms are available from Farmers
(SRN 31-1062) and the Social Security Administration (Form SSA-7004-SM (SPEC)).

Begin this third appointment by filling out these forms. Make it clear that you are not an
attorney and the simple will you have brought is really just a band-aid for now. Give
them a business card from an estate planning attorney you work with.

Many times, your clients will need additional time to complete their wills. That’s okay.
That can be their homework for the next time you visit with the life insurance proposals!

Now you can transition into a life needs analysis by saying, “The will takes care of the
legal aspect of dying. Now we are going to look at the financial impact a death has
on your family.”

Your next job is to educate them about the different kinds of life insurance. Simply ask
them: “What do you know about term life insurance?” Encourage them and praise
them. This is a great time to bring out objections. Don’t try to convert them! Just help
them understand the differences. Use the print out on the following page to help them
understand one of the most important differences between term and permanent policies
(net cost over time). Then ask them, “Which concept do you prefer?” This will
prepare them for the Short-Term vs. Long-Term approach of the needs analysis as well
as your final proposals.

                   Life Insurance Comparison
                   Male Age 35, Non-Smoker, $300,000 Benefit

      Year            20 year term         FFUL           FPUL
       1                 $414              $1,866         $2,944
       2                 $414              $1,866         $2,944
       3                 $414              $1,866         $2,944
       4                 $414              $1,866         $2,944
       5                 $414              $1,866         $2,944
       6                 $414              $1,866         $2,944
       7                 $414              $1,866         $2,944
       8                 $414              $1,866         $2,944
       9                 $414              $1,866         $2,944
       10                $414              $1,866         $2,944
       11                $414              $1,866         $2,944
       12                $414              $1,866         $2,944
       13                $414              $1,866         $2,944
       14                $414              $1,866         $2,944
       15                $414              $1,866         $2,944
       16                $414              $1,866         $2,944
       17                $414              $1,866         $2,944
       18                $414              $1,866         $2,944
       19                $414              $1,866         $2,944
       20                $414              $1,866         $2,944
       21               $2,922             $1,866         $2,944
       22               $2,922             $1,866         $2,944
       23               $2,922             $1,866         $2,944
       24               $2,922             $1,866         $2,944
       25               $2,922             $1,866         $2,944
       26               $2,922             $1,866         $2,944
       27               $2,922             $1,866         $2,944
       28               $2,922             $1,866         $2,944
       29               $2,922             $1,866         $2,944
       30               $2,922             $1,866         $2,944
 Total at age 65        $37,500            $55,980        $88,320
  Cash Value              $0               $78,910       $175,405
Net Gain or Loss     $37,500 Loss      $22,930 Gain    $86,656 Gain

Risk Management-based Sales

Life Insurance Needs Analysis
Now pull out your life needs analysis (a pre-filled example is included on page 27). Help
your clients fill in the blanks:

 Final Expenses

Funeral, Lot and Marker: Explain that a basic, “traditional” funeral and burial costs
about $12,000 to $15,000. A non-traditional (i.e. cremation) service will run about
$5,000. Then ask, “Are you a traditional or non-traditional person?” This lets your
client side-step the issue of money!

Doctor and Hospital Bills: Consumer Reports says you should expect to have $15,000
to $20,000 available to pay for doctor and hospital bills associated with a final illness.
This is assuming your client has health insurance. These costs come from non-covered
services and co-payments. If your client doesn’t have health insurance, more money will
need to be set aside for this purpose.

Current Bills: Your clients should fill in the amount of outstanding or anticipated
consumer debt they have or expect to have in the reasonably foreseeable future.

Taxes, Probate and Estate Administration: The decedent’s estate may responsible for
real estate or other ongoing taxes. Also, Probate and Estate Administration costs will
often run 3-5% of the gross estate (which includes outstanding mortgages). For further
information, see and estate planning attorney.

 Housing Expenses

Mortgage Free Home: Have your client fill in the remaining balance on their mortgage
or a lump sum amount to purchase a home if they currently rent.

Risk Management-based Sales

Life Insurance Needs Analysis (continued)
 Family Expenses

How much will your family need each month to survive: Here, your client will
estimate how much money his family will need to survive in his or her absence. This
will include food, clothing, insurance, education, rent (if applicable), etc. Multiply the
monthly amount by 12 for the annual amount then multiply the result by the number of
years the family will need the money (usually until the children are through school and
out of the house).

 Short-Term and Long-Term Needs

Before running the totals, have your clients go back over what they have written and
indicate which needs are short-term (ST) and which are long-term (LT) needs. Short-
term needs will only apply to a limited time (5, 10, 20 years, until the kids are 18, etc.).
Long-term needs are expected continue throughout the client’s life.

Short-term needs are usually covered by term insurance. Long-term needs are generally
covered by permanent insurance.

Now, run the totals for total amount needed, current life insurance, amount still needed
and Short- and Long-term needs. This will form the basis for your life proposals.

How Much Life Insurance Do We Need?
                                            John                 Linda
                                            (8/28/65)            (4/20/68)

Final Expenses
Funeral, Lot and Marker         (ST/LT)                 $       7,000        $   12,000
Doctor and Hospital Bills       (ST/LT)                 $       15,000       $   15,000
Current Bills*                  (ST/LT)                 $       45,000       $   45,000
Taxes/Probate/Estate Admin.      (ST/LT)                $       2,000        $   2,000
                               Total    $   69,000          $    74,000
*Including Credit Cards, Credit Lines and Auto Loans

Housing Expenses
Mortgage Free Home          (ST/LT)                     $       200,000      $
Length of Mortgage in Years 30
                           Total $          200,000         $    200,000

Family Expenses
How much will your family need
each month to survive        (ST/LT)                    $        3,000       $    1,000
X 12 months =                           $    36,000         $    12,000
X 17      years =              Total    $ 612,000           $ 204,000

Total Your Family Will Need to Survive
Total Needed                            $   881,000         $   478,000
Current Insurance                       $   100,000         $   100,000
Amount Still Needed            Total    $   781,000         $   378,000
                        Short Term      $   657,000         $   249,000
                         Long Term      $   224,000         $   229,000
To meet this need I can afford $ 250 per month.

Risk Management-based Sales

Life Insurance Solutions
 Life Proposals

Now that your clients have shown you how much (and what kind of) life insurance they
need, it’s time to prepare the proposal. Typically, your proposal will have three options:
1) Permanent insurance with a cash value equal to premiums paid (at year 20 or age 65
or whenever); 2) Part permanent and part term; and 3) All term for all or a portion of the
amount actually needed (see examples on the following pages).

 Life Presentation

Before you make the actual sales presentation, remind your clients about your role as
their risk manager: You are their eyes and ears for risk, you offer solutions and they
select the solution they prefer.

Revisit the needs analysis and summarize their short- and long-term needs. Get
agreement on each amount and ask, “Does that make sense?” When you get to the
amount of insurance needed, ask, “Does that still seem reasonable?” Get agreement
before moving on. Be happy when an objection comes to the surface. It’s better to get it
into the open now rather than mysteriously lose the sale, later.

Now, go through the proposal and show how the short- and long-term needs match the
short- and long-term insurance. (Note: the “Money Back Program” included in the
sample proposal is designed to return to the client the net premiums paid in the event
that the client reaches their financial goals as planned, say, by age 65.)

After showing your client the proposal, say “Does it cost more to do it right?
Absolutely!” After that sinks in, ask “Which concept do you like best?” Remember,
we’re more interested in what’s right than we are in the price. Once your client tells you
which option they prefer, continue by saying, “Great! All I need is some basic
information.” Move right into the application. You don’t need to ask if they are ready to

              Life Insurance Proposal
                     John Client
              Santa Cruz, California

Option One: Money Back Program

                   $224,000 Long Term Need (FFUL)
               $657,000 Short Term Need (20-year Term )

                         Cash Value at 20 years*

                       Premiums paid at 20 years

      If you wanted to cancel your policies after 20 years, you would
                       get all your premiums back!

                 Monthly Premium is $236.00 per month

               *Based on Current but non-guaranteed values.

Option Two

               $224,000 Long Term Need (20-year Term )
               $657,000 Short Term Need (20-year Term )

                 Monthly Premium is $83.06 per month

Option Three

                       $300,000 (20-year Term )

                 Monthly Premium is $33.75 per month

Risk Management-based Sales

The intense competition in the insurance market isn’t going to go away anytime soon. If
you are waiting for our prices to drop and a flood of new business to walk through your
door, forget about it. Even if that did happen, your new customers would leave as fast as
they arrived as soon as they found a lower rate.

It’s time to realize that the successful agents of the 21st Century have to be risk
managers. Don’t fight it. Use the Risk Management-based Sales approach and change
your focus from price to service

Don’t forget to use your two secret weapons:
1. Make sure your clients are properly insured, regardless of whom they buy from, and
2. Package Policies.
You will improve your close rate whether prices are up or down, your PIF per household
will improve and your customers will stay your customers even when Geico and
Progressive call them after dinner.

                                --Hugh Seagreaves, AAI, and David Dutcher, JD, CPCU


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