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Is insurance a commodity?

Aug 19 2014

Insurance can certainly seem like a commodity if purchasing it is primarily price focused.  If you’re not an active participate and insurance protection is more of an after-thought, it may not be getting the attention it deserves as a strategic tool to protect your bottom-line.   

Large corporations often devote thousands of dollars and dozens of staff to pay attention to risk management.  Even that team has to engage a broker they trust to fill in the voids and exposures in their risk management plan.  As a small to mid-size business, you can emulate their dedication to risk management by hiring an agent who is willing to listen to you and who is truly interested in your business. 

You are bombarded everyday by ads from web-based and direct writing insurance companies that will let you choose only the coverage you want?  Heck, they’ll let a Massachusetts automobile owner select the minimum $5,000 worth of liability coverage without any questions.  Really?!... $5,000 of coverage to pay for damaging someone else’s property.  Think about that.  You would be insuring against getting in an accident with a jalopy worth less than a good mountain bike. Run into your neighbors Toyota Corolla and you’ll be paying a big chunk of change out of pocket. 

CommodityFor less than the daily cost of your  Grande, Latte, Mocha, Supremo Express with a double-shot of caffeine that you get on the way to work at your favorite coffee joint, you could better assure you have place to go to work should you be sued.  Insurance has a price, which makes it seem a commodity, but insurance policies aren’t all the same.  The most expensive insurance policy is one that doesn’t adequately cover you for the risks you face.  Now that’s a high price.  

If I was sitting across the table from you and all you wanted was the minimum protection and price, I’d probably tell you that I’m not the broker for you.  Nothing good would come of that relationship.  However, if you were really interested in engaging an agent, who wants to help you protect your business and minimize the cost to do so, then we’d be a great fit. 

So, be honest with yourself. How do you want to do business?  Do you want to roll the dice and hope that nothing bad will happen to you and your business, or do you want start treating insurance less like a commodity and more like the risk management tool that it is?  Take an active role in protecting what is important in keeping your business viable. Being well protected doesn’t necessarily cost more especially when you consider the cost of being unprotected.

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