For Producers

Are You Competing in the Commodity Trap?

Barney is a 30-year-old producer.  He is intelligent and highly motivated. He is technically proficient having obtained his CIC and ARM designations. That being said, Barney is caught in the “commodity trap.” Can you relate to Barney?

Like many insurance and risk management professionals, Barney is extremely frustrated with the insurance business and is considering leaving the industry.  He is tired with competing in the “commodity trap” – the 90-day insurance bidding process.

Are You Competing in the Commodity Trap?

Commoditization occurs when the consumer perceives little or no distinguishable difference between products, services, and resources.

When this happens, price becomes the primary differentiator.  Picture commoditization as a disease that eats away at your knowledge, wisdom, and professionalism.  It is so cruel and debilitating that it strips away the value proposition of even the most seasoned producer – his or her professional purpose for existence – to a number.

If you’re frustrated like Barney, there are a few things you can do right away:

  • Realize that you are not to blame. Many producers get caught in the commodity trap and need a dose of reality to get out.
  • Ask yourself these 3 questions: 
  1. To what degree does the personal lines, small business, and middle-market consumer have the time and ability to identify exposures?  (0 low to 5 high)
  2. To what degree does the typical insurance agent or broker assist his or her client with exposure identification? (0 low to 5 high)
  3. To what degree does the middle-market consumer enjoy the traditional insurance bidding process? (0 low to 5 high)
  • Understand that the consumer is willing to pay a premium, redefine the buyer/ seller relationship, erect barriers to your competitors, and establish you as a trusted advisor when two primary activities occur:
  1. You reveal to the buyer an Unrecognized Problem
  2. You establish for the buyer an Unanticipated Solution

Back to Barney. Once Barney understood the implications of the commodity trap, his life changed. Barney said, “The three questions you gave me last week made me realize that I need a process to enable my clients to identify risk issues with solutions outside the boundary of the insurance transaction.  If this can be accomplished, I will be playing a different game than my competitors.”

Barney had figured it out.