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Value-Based Selling in the Insurance Industry: What You Need To Know

Running an insurance business can be a fulfilling career. It is an opportunity to help people protect their most important assets while enjoying a lucrative career. At the same time, there are a lot of obstacles that must be overcome. Many people have a difficult time purchasing something when they don’t see an immediate need for it. Insurance is something that people purchase to protect themselves against a hypothetical situation.

Some people have a difficult time understanding why they need to purchase something when they don’t have any current issues; however, that is where value-based selling can be helpful. What is value-based selling in the insurance industry, and how can agents and brokers use it?


What Is Value-Based Selling in the Insurance Industry?

First, it is important to understand the viewpoint of the customer. A lot of customers believe they do not need to purchase insurance because they don’t envision themselves needing the benefits they provide. Whether this is dying young (life insurance), being involved in a motor vehicle accident that is their fault (collision or comprehensive car insurance), or having any problems with their homes (home insurance).

Therefore, they are simply looking for the cheapest insurance product possible. The goal of the insurance agent is to get the customer to understand why it is important to focus on the value of the insurance policy instead of the overall price tag of the policy.

This practice is called value-based insurance selling. In this process, insurance agents and brokers need to direct the attention of the customer away from the cost of the policy and toward the benefits it provides. By placing the customer in a hypothetical, but realistic, scenario, where they might need that policy, insurance agents will have an easier time closing the sale.


How Does it Work For the Insurance Industry?

There are several examples of situations where value-based insurance selling can be beneficial in the insurance industry. Some of the biggest examples include:

  • Car Insurance: Car insurance is one of the biggest examples where value-based insurance is critical. The minimum level of car insurance someone must have to legally operate a motor vehicle is liability-only insurance. It is also the least expensive policy, so a lot of people want to buy that one. Instead, it is important for insurance agents to make sure policyholders also protect their own vehicles with a value-based insurance policy. Examples include collision coverage and comprehensive coverage.
  • Home Insurance: Home insurance is another prime example of a situation where value-based insurance is helpful. A lot of people purchase the minimum level of home insurance required by the mortgage company. This policy frequently does not include protection for issues such as severe storms, earthquakes, and floods. It is important for an insurance agent to convince someone that this added level of protection is something they need.
  • Life Insurance: There are far too many people who do not have life insurance coverage. It is critical for people to make sure their income is protected with the right life insurance policy. Even people who have life insurance often do not get a large enough policy. Value-based selling should convince someone to purchase life insurance that covers all of their debts and future earnings instead of the cheapest option.

These are common examples of situations where value-based insurance is needed. Why does the strategy work well, and how can agents and brokers use it effectively?


Why Does the Strategy Work Well?

The main goal of this strategy is to focus on what someone is getting instead of the price tag. It is true that the right insurance policy for someone is going to be more expensive than the cheapest option; however, instead of framing it as a cost, it is important to frame it as added protection.

For example, by purchasing a value-based coverage, policyholders will be getting an added layer of protection that can guard them and their assets against a potentially dangerous situation. In some cases, this type of policy can protect someone against financial catastrophe. That is the crux of how brokers and agents should present a value-based insurance policy. How does it work?


How Can Agents and Brokers Use Value-Based Selling?

By implementing this policy, it is possible for brokers and agents to increase their conversion rate. Some of the top ways to implement this policy include:

  • For car insurance, agents should explain to policyholders that liability-only insurance policies do not protect against theft or natural disasters. Someone in the Midwest might need added protection against tornadoes. People on the coast might need more protection against floods and hurricanes. Agents should explain to policyholders that theft can happen at any time.
  • For life insurance, agents should remind policyholders that they may need additional protection as their income rises. The goal of life insurance is to replace lost earnings in the event that the policyholder passes away. Earnings change as people’s careers progress, and people should protect their families with the right level of protection.
  • For home insurance, agents need to take a close look at the specific level of protection provided by each policy. Then, policyholders might need additional protection against specific threats. By framing these threats, such as fires and floods, as possibilities, it is easier for people to see what type of protection they are getting with each policy.

By discussing value-based policies as what policyholders are getting instead of how much they have to pay, it is possible for agents to increase their conversion rates.


Contact the American Agents Alliance Today To Optimize Sales

Value-based selling is an important component of the insurance industry. At the American Agents Alliance, we support independent insurance agents by providing them with resources such as our preferred insurance markets and lead generation programs to help optimize sales. Contact us today to speak to a member of our team.

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