The majority of my clients tell me that they do not adhere to one or more of these three duties.  Rather, they trust that their insurance agent has provided the insurance coverage and limits of insurance that is best for their specific situation. This is problematic.   

Many financial advisors refer their clients to P&C agents because they do not sell these products.  Keep in mind that your reputation may suffer if the agents that you refer clients to do not meet their duties and responsibilities in the insurance sales transaction. Since few of you sell P&C products it may help to explain the P&C sales process using a brief analogy. 

A great number of people buy insurance through the independent agency system where insurance agents sell the products of many different insurance companies. Think of these insurance salespeople as manufacturer’s representatives. The purchaser of insurance (the insured) is the customer and the insurance company providing the insurance policies can be viewed as the manufacturer. 

The job of most manufacturer’s representatives is simply to place their customer’s order with the manufacturer that the customer has chosen; nothing more and nothing less. For instance, reps who sell intricate machines that can be modified by the manufacturer do not likely provide their customer's intricate machine specifications to the manufacturer. Rather, since the customer is in the best position to determine whether or not the capabilities of the machine they are ordering meets their needs, the obligation to provide specifications rests with them. 

While your clients may consider it unfair that one of the primary roles of an insurance agent is to simply put an insurance policy requested by their customer into effect, it is too great a burden to place upon insurance agents to be mind readers. It is not uncommon after a claim is denied for an insured to make statements such as, "I told my agent that I wanted coverage for everything," or "I told my agent that I didn't care how much my insurance policy costs….I said that I wanted the highest limits possible." Of course, these statements and other similar remarks might be true.  But all too often it is left to a mediator, or to a jury, to decide what the truth is in these types of situations based upon the facts presented. 

Advisors understand that court cases are time consuming and costly for all parties. Rather than dealing with problems after a negative outcome is experienced, such as when a claim is not covered, it is always better to try to prevent such situations from occurring. To achieve this goal, both the insurance agent and the insurance purchaser must better understand their respective roles in the insurance sales process. Here are some suggestions to keep in mind when you sell insurance products to your clients or to help you counsel your clients when they are purchasing P&C insurance through an insurance agency:   

  • Both parties should ask questions and provide information to the other side. Your clients, the insureds, should ask their insurance agent to slow down when necessary and to provide additional information when their agent is running through questions too quickly.

  • Your client must clearly tell the agent what coverages they are interested in buying and what limits of insurance they wish to purchase. 

  • If clients are unsure of anything, ask the agent for help. 

  • Clients should take written notes and ask for copies of all applications that are completed.