Moving Beyond the Perception Trap

Scott Addis’ biggest pet peeve is the way consumers perceive insurance agents. After an unpleasant encounter with a stranger at a cocktail party who, upon learning that Addis was an insurance broker rather than a CPA or an attorney, immediately became defensive and disinterested in their conversation, Addis decided to do something about what he calls the “perception trap.”

While Addis had described himself as an insurance broker who designs and develops “risk management programs for growth-oriented middle market businesses,” the stranger, after hearing the word “insurance,” couldn’t get beyond perception of Addis as a man with something to sell. Addis tried to explain that insurance was only one part of what he did; that the focus was more on partnering with clients, trying to understand their businesses and their risk issues, and identifying their exposures. The man remained unconvinced.

A few weeks later, Addis, who is active in his Philadelphia-area community as a coach of youth sports, as chair of the Chamber of Commerce and as a member of numerous community boards, had the opportunity test his perception theory at a community sports event. In a conversation with another person he didn’t know, Addis was asked what he did for a living.

“I looked him in the eye and said, ‘I am a risk architect,'” Addis said. The other fellow “leaned forward and said, ‘What is a risk architect?'”

“I design and develop risk management programs for growth-oriented middle market businesses,” Addis replied. “I go in and learn the business from the inside out. We have a proprietary process to identify exposure. We identify, measure, prioritize, and then we start mitigating risk.”

From that point on, Addis said, the person was hooked and wanted to know more.

Three Traps

During two separate sessions he presented at the Independent Insurance Agents of Texas annual convention — “The Purple Cow Leadership Workshop” and “Changing the Game” — Addis, the owner of the Addis Group and Addis Intellectual Capital LLC, focused on methods agents can use to become remarkable, and therefore indispensable, to their customers. He said agents actually face three difficult traps on the path to success: the commodity trap, the perception trap and the anxiety trap.

“If the consumer believes there is little or no distinguishable difference between product or service A versus B, what becomes their determining factor? Price,” Addis said. That’s the commodity trap.

While everyone is a commodity shopper at some point — in the supermarket or an auto dealership, for instance — when it comes to insurance, agents have no one to blame but themselves if their customers see their product as a commodity.

When we walk into a commercial business and the owner says, ‘It’s very nice to meet you. To make our meeting as efficient as possible, I have copies of my insurance policies. I have claim data and a little bit about our company. By the end of the week get me the list of insurance companies you want to approach …’ Who created that?” Addis asked. “Who created the commodity trap for our business? Did the consumer do it or did we do it? We did it. … We didn’t mean to do it but we’ve done it. We have fallen into the commodity trap.”

Consumers often view agents as not being as important as other professionals, such as CPAs and attorneys, Addis said. That’s the perception trap. CPAs and attorneys are seen as invaluable business consultants. But insurance agents are business consultants, too. “We protect assets people have built up,” Addis said, “their physical assets, their liability and so forth. Insurance is a small piece of what we do. …The advice and counsel and services we provide is immense. … If we believe and get caught in the trap that our primary function is to sell insurance, that’s our problem.”

The final trap is the anxiety trap.

Anxiety is false fear, Addis says. Change often causes anxiety, he said, but there are ways of moving beyond that.

“To take the step to be consultative and diagnostic, to take the step and be something maybe you don’t think you are today, there’s anxiety. … When someone says, ‘we’re in the business of sales,’ I come back and say, ‘I sell one thing: I sell my ability to educate.’ Why do we need to educate? Because consumers don’t understand insurance or risk management.”

RIOS: Your Best Friend

Business owners don’t enjoy buying insurance but what they do like to do is talk about themselves, Addis says. And part of the unique process of moving beyond the commodity, perception and anxiety traps is giving your customers the opportunity to do just that.

That’s where a process called RIOS, which Addis calls his “best friend,” comes in. RIOS stands for risk issues, opportunities and strengths. RIOS will “make you loads of money,” Addis said.

“Never walk out of a meeting with out introducing RIOS. Get to insurance later,” he said. “RIOS is a reminder for you to be consultative and diagnostic.”

It goes something like this. Begin the conversation by asking the customer to tell you about the strengths of their business, Addis said. Ask them about opportunities for growth and expansion over the next couple of years. And finally, “Are there any risk issues that might prevent you from getting those opportunities?”

Most middle market businesses have no one on staff, like a risk manager, “whose job it is 365 days a year to identify, prioritize and mitigate risk. … Most of the companies we’re dealing with don’t have that luxury,” Addis said.

“To what degree do your competitors have a practice in place to uncover these exposures?” Addis asked.

Assuming that the typical middle market CEO or president doesn’t have the time and ability to identify exposures, agents are missing opportunities to fulfill a huge need if they’re not prepared to be consultative and diagnostic, Addis said.

“Our competitors don’t have a process,” he said. “We need to go ahead and develop a process to learn our customers’ business, identify risk issues, and position ourselves such that they’re going to be able to perceive and understand our value.”

The key is to “have the consumer understand that our job is not to sell insurance as a product, our job is to become their outsourced risk manager. … We have to prioritize, we have to measure and over time we have to continue to improve that. The consumer will say: ‘Why would I want to start over? Why would I want to go back to ground zero with another organization?’ … That accumulated knowledge is irreplaceable,” Addis said.

Addis said his action plan starts with an audit of the company, which he performs for no charge, beginning with exploratory conversations with the company’s principals. Beyond that, employee interviews and involvement with the firm’s safety committees are some of the best methods of really getting to know the operation’s business and risk issues.

“Have a very busy [top manager] go through an audit process away from the bidding process,” Addis said. “I know if they will my hit ratio goes from probably 15 to 20 percent up to 70 percent or higher. I know if they allow me to do employee interviews and sit on the safety committee it probably goes up to 80 or 90 percent.”

Employee interviews are very successful in revealing problems, Addis said. Employees, if they know the interviews are private and confidential — which they must be — will reveal things they would never tell the owners and managers of the companies for which they work, he said.

“You will grow when you decide to be remarkable and do something about it,” Addis said. When your customers think you’re remarkable, he said, they’ll pass it on; they’ll become your “raving fans.”