Suspect vs. Prospect

Many new insurance agents get excited anytime they are able to speak to a warm body before they realize that, with respects to Thomas Jefferson, all people are not created equal. 

 There are some people, it seems, who get their jollies making a commission sales person jump through hoops while they know all the time, they have no intention of buying anything.  It gives them a sense of control.

 However, you never know.  It never hurts to be polite and speak to people over the phone.  The person you are speaking to may very well turn out to be a customer.  Even better, they may be so impressed with you they could turn into a source of referrals for you.

 Still, there are people who will waste your time if you are not careful.  Before you spend time away from your business or family, you should prequalify every person you set an appointment with to discuss their insurance options.  If the suspect fails to measure up in any of these areas, he is not a prospect.  Send him a letter telling him to contact you, if he is still interested, when his position improves.  After you send that letter, move on.  Forget about him.

 A very common cause of failure among new insurance agents is placing their hopes on suspects and not looking for prospects.  There are 4 criteria that are common to every prospect.  Suspects may be useful to keep your sales manager off you back when he asks for your weekly activity accounting.  T they will never earn you any money.  Only legitimate propects will do that.

 PAY

 I would love to own an SUV for my wife and a 4 door pick-up truck for myself.  Both of us like to sit up high when we drive.  Unfortunately, I am still paying for my son’s college education.  In addition to that, most of my income is based on health insurance.  In 2011 Obamacare is going to force insurance companies to cut my commissions.  Right now, I do not know how big that cut will be.  Until that college debt is paid off and I know how much of a cut my income is going to take thanks to Obama, Pelosi and Reid, I am not willing to commit the money required to obtain the vehicles we would like.

 Suspects are often the same way.  They may see the need for $ 500,000 of life insurance or an upgrade of their major medical insurance.  They may meet all of the other 3 criteria but if they are not willing or able to pay the premium at this time all you have is a suspect and not a prospect.

 One way to find out if they can afford your product is to ask them up front, “What do you consider a fair price for the type of insurance you are looking for?”  If they indicate that they cannot afford your product, don’t waste your time with them.

 That does not mean they are not a future prospect for you.  Enter them into your calendar to contact at some point in the future when their financial situation may have changed.  For now, though, move on.

 PASS

 Many insurance agents have gambled their future on one application.  An application this week may give you points with your sales manager for “apptivity” but if it ends up being declined by underwriting you will not get paid.

 Those who have sales managers understand the pressure to produce applications to keep them at bay.  It is important to consistently submit completed applications but eventually all new agents realize that they are only paid for applications that are approved by underwriting.  If the application is not approved, it was a waste of time to fill out those 40 pages.  New agents should learn what the underwriting rules are for their companies and find out if your suspect can meet your company’s criteria.

 I market primarily health insurance.  When I am speaking with a suspect the first time and determining what they are looking for, I ask them what prescription medications the potential insureds are taking.  I know, at least right now, the underwriting rules for the companies I am appointed with.  I know that none of my companies will approve a policy on anyone taking more than 2 prescriptions.

 If the person calling is taking 3 or more prescriptions I will be polite and gladly answer their questions over the telephone but will not spend the time to leave my office to write an application that I know will be declined.

 If you are a life insurance agent, unless you deal with high risk insurance, it does not make a great deal of sense to spend the time required for an appointment to talk about life insurance with someone who has already been diagnosed with cancer and only has 3 months left to live.
 
Fortunately, most of the companies I am appointed with will accept applications that are done on the internet.  I am able to direct them to continue their shopping through my web site.  If they want to proceed with an application and underwriting, I do not feel like my time has been wasted when they are declined.  If, for some unexplainable reason, they are approved, it just means I got a windfall commission.

 NEED

 Often people don’t spend money on what they need but on what they want.  Most states require proof of insurance either at the time of an accident or when registering their vehicles.  People with a mortgage on their houses are required to carry home owners insurance to protect the interest of the lender.  Because they are required by an outside authority they are needs.

 Life & Health insurance are not, currently, required by law, although, if Obama has his way, health insurance will be required in 2014.  Right now, they are not needs.  It is your responsibility to convince suspects that their desire for insurance is more than a want.  It is a need.

This is often the most difficult and necessary part of your job.  If you are unable to change their wants into a perceived need, the very next time they are in a financial tough spot and need extra cash your life or health insurance will be one of the first expenses they eliminate. 

 Depending on your contract, your company may “charge back” all of the commissions they have paid you.  Every experienced agent has had a client lapse their policy in the first year.  Most of them have lived through charge backs.  They are never fun.  They are, to me, one of the worst parts of the insurance industry.  I know and understand why charge backs exist but I still don’t have to like them.

During my first year I had qualified for my company’s reward trip.  In January of the next year I was informed that my sister-in-law had lapsed her term life insurance policy in December.  It was going to disqualify me for the trip.  The $ 14 a month premium was not the problem.  The lapse placed me over the loss ratio required for the trip. 

Fortunately, we got it straightened out but it almost cost me that trip because I did not convince her of the need for the life insurance.  Rather, she saw it as a favor.  In her value system she needed that $ 14 for Christmas shopping more than her desire to help her brother-in-law.

If you are able to convince your prospect that they do not desire, but need your insurance, you are managing against future lapses and charge backs.  When your client comes on hard times, or wants more money for Christmas shopping, he will think twice before giving up something he needs rather than something he just desires.

 SEE

 With the rise in popularity of the internet and the number of insurance companies who will now accept applications completed on line, this fourth criteria is not as important as it once was.

 Still, there are circumstances that require your prospect to be physically seen by either you, a paramed or both before the underwriter will approve their application.  Many life and disability insurances require still require a representative of the insurance company to physically see the applicant.

 If the individual is able to pay the premium, pass underwriting and understands the need for the insurance but you are unable to coordinate a time to meet with him, you do not have a prospect.  Like the girl in high school who had no intention of ever dating you but was too sweet to say, “no,” suspects will make all types of excuses not to meet with an insurance agent.  If you allow them to, they will continue to postpone you for months until they finally tell you that they bought from someone else weeks ago.

 Many years ago, there was a prospecting system called the One Card system.  I can’t remember who published it or I would give them credit.  There are several things about the system that, in my opinion, are dated but I did learn one principle that I still practice today.  That is the 30 day rule.

 It is not always clear if a suspect is merely making excuses or if their schedule is really as full as they say.  If someone has contacted my office and not followed through with what they were instructed to do within 30 days I call them and ask them, “Should I keep your file open or close it?”

 That is a relatively polite way to restart communications.  If they truly want the insurance they will tell me to keep it open.  I tell them it will stay open for another 30 days but I will close it if they do not contact me during that time.  If they are not serious about doing business with you, it give them the chance to gracefully cut off communications without having to say, “no.”

 Regardless of their answer, it lets me know if I am dealing with a true prospect or just a suspect playing with me.  It puts me back in control.

 I realize these are just opinions.  If you have a different point of view or a helpful tip regarding prequalification of suspects that will help everyone, please share it in the Comments section.  No one knows everything.  We always can learn something new.

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About The Insurance Barn

Husband of 1, father of 2, health insurance agent and insurance trainer.
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