When conversations in my community turn to today’s economy, I am repeatedly asked, how did this happen? Why is the stock market so crazy? Will the economy ever get better?
The questions come from people with differing backgrounds, education, or industries. They want to know, understand, get some control.
Many of these conversations end up focused on the “bad news” effect–how bad news from a company, perceived or real, can harm reputation, and how that can harm confidence, leading to lower sales, customer defections, and so on.
Insurance product experts, in the field and home office, know this all too well.
As soon as American International Group’s financial problems hit the news this fall, advisors and brokers say their phones were ringing. Worried customers were calling to see if their insurance was all right. They reportedly asked: “Should I pull my money from that contract?” “Are all insurance companies in trouble like that?” “Shouldn’t I pull my money out?” “I thought you said insurance is safe!”
Home office people tell me they’ve heard similar comments, via their call centers or wholesalers, brokers and agents.
So, just like that, the bad insurance news of the day has cast a negative light on insurance products of various types and providers. It has hurt the image of the entire industry and its practitioners.
At times like these, industry experts always like to point out, advisors will be able to calm their clients’ rattled nerves and to retain business–if, that is, the advisors have sold their products properly and established trusting relationships with their customers.
That makes a lot of sense, especially if the bad news is of the routine variety–i.e., Company A’s ratings have dropped from the previous quarter.
But if faced with “really bad news”–such as today’s credit meltdown, global recession, etc.–it’s another story.
In time of “really bad news,” advisors and companies must rely on more than past educational sessions, service and support. They need to educate (or re-educate) customers about how insurance products, services and companies perform in the face of tremendous challenge such as today’s.
In short, times of really bad news call for really good customer engagement.
Douglas A. Mishkin made this point in his recent address before the annual meeting of the National Association of Independent Life Brokerage Agencies.
“In times like this, it is more important than ever for us to make our producers understand that our industry and carriers still have strong underlying fundamentals,” said the BGA with Algren Park Avenue Brokerage, New York, N.Y. and the outgoing chairman of NAILBA.
“Producers must reassure clients that the promises held in their insurance contracts are safe.”
It is not enough to commiserate over the bad news. It is not enough to offer reassurance only to people who call with concerns. It is not enough to assume that the asset allocation program set up last year will keep the customer steady today.
What’s needed is a proactive outreach by all industry professionals, to answer questions, allay concerns and give perspective.
If that weren’t needed, why is it that so many people are stopping me to ask what is happening and what they should do? I am not an advisor, and they know that. But they know that I write about insurance and related topics so they want to find out what I know, think and believe.
How much better it would be if their advisors and companies had anticipated those questions and provided answers, even before they could articulate their concerns.
Some advisors tell me that they have indeed been responding. Some have talked with clients not only about their AIG policies but also about how insurance responds to economic problems like today’s. Some say they’ve worked the phones late into the day for the past several weeks, on just this mission.
And guess what? Some say their sales of fixed products, especially fixed annuities, have actually gone up during this period.
That could be the silver lining of such a proactive response. Once consumers understand the impact of “really big news,” once they see the differentiation between stronger and weaker companies, once they learn how surrendering policies or making withdrawals will affect their finances, they become less knee-jerk and more long-term in their thinking. They become willing to buy products they had considered avoiding like the plague.
To reiterate, this is a time of really bad news. It requires a really big response from insurance and financial professionals.