Commoditization: The Devastating Impact on the American Consumer

Can we talk about insurance for a minute?

Nope.

Let’s be honest, that’s probably your real reaction, right? Because who wants to talk about insurance?

I get it.

Rest assured, this is not my attempt to sell you an insurance product. It’s not a guide on the latest threat you need to be concerned about, and how there’s an insurance solution to remedy the situation. And it’s not a cleverly constructed series of stories that can only lead you to a conclusion where the answer is to buy your insurance from CoverLink.

My goal is simply to offer advice. Drawing on much of what I’ve learned after nearly 20 years spent in the insurance industry, seeing first-hand the pitfalls so many consumers find themselves in far too frequently.

Pitfalls that could’ve been easily avoided, had someone simply provided the roadmap.

And while the solution is relatively simple, the problem that exists is somewhat complex.

Its complexity primarily results from the fact that the insurance industry is responsible for creating the very problem plaguing consumers today.

How so?

Greed and commoditization.

From my viewpoint, greed began when profit-first insurance companies decided growth was more important than doing what’s right for their clients.

Profits were prioritized over people. And the equation was devilishly simple for insurance companies that chose this route: growth = more profit.

But growing rapidly is difficult when you’re selling an inherently complex product like insurance.

So what do you do? How can you possibly mass-advertise to an entire population in 30 second commercials, and honestly articulate the complexities of an insurance policy?

Answer: you don’t.

Instead, you completely shift the conversation.

You don’t talk to consumers about what they’re actually buying… instead of helping make sure consumers avoid the pitfalls that could cause financial catastrophe in their lives… instead of putting people ahead of profits, a decision was made.

That decision was to enter the conversation already taking place in the minds of consumers.

The conversation goes something like this: I don’t really understand my insurance. I know I need it, but I’m not sure what’s right for me. What I do know is that I really hate paying for it.

Born is the playbook for nearly every ad you will see or hear about insurance today.

If insurance companies can’t (or more accurately, won’t) educate consumers on the product they’re purchasing, they can certainly shift the entire focus to the price.

And after all, as mentioned above, no one likes to pay for insurance. It’s not like you get that retail-therapy high after buying a shiny new insurance policy.

But it’s hard to argue with the marketing genius behind the commoditization strategy.

If growth was the #1 objective, then mission accomplished.

Suddenly, the purchase of a hugely complex product that’s designed to restore the lives of individuals, families and businesses after a catastrophe, has been reduced down to a catchy jingle.

Not what you get for the amount you’re spending. Just purely a dollar amount.

Or more specifically quantified: insurance = commodity

Back to that greed and growth objective, and boy, has the commoditization formula been good for the insurance companies that have adopted this model.

But what about consumers and small businesses?

Do you feel better when your insurance company tells you don’t have coverage for your claim because you saved 15%?

See why this problem is complex?

Consumers are suffering because of the insurance product commoditization – get this – created by insurance companies!

The greed and insatiable desire for growth led to a shortcut.

If insurance is viewed as a commodity, we just have to offer a lower price than what a consumer is currently paying.

We’ll make it easy for consumers to self-select their own insurance, show them how the cost goes down as they reduce the protection they’re buying, and voila – they found a lower cost option.

Sales soar.

Everyone wins.

Except for consumers who actually need to use their insurance.

And here’s where I get really fired up.

Grab your go-to search tool, and look up the definition of a commodity.

Here’s one of my favorites: a mass-produced, unspecialized product

Merriam-Webster even provides a few examples: chemicals and memory chips.

How’s that relate to insurance?

It doesn’t.

That’s my point.

Insurance is not a commodity.

At its fundamental level, an insurance policy is a legal contract.

If you’re curious, dig up one of your policies.

Could be any policy… your auto, home or business policy.

Does the language in the policy sound like it was created by an attorney?

That’s because it was. It’s a legal document.

And as someone that’s been working in this industry for nearly 20 years, I’ve reviewed thousands of these policies (legal contracts) during that period of time.

Rarely have I ever reviewed two policies that were the exact same.

Why does that matter?

Because despite all the high-priced insurance commercials, radio spots and targeted online ads bombarding you every day trying to convince you that all insurance products are the same – they’re not.

And when issues inevitably arise, it’s usually not the insurance company suffering the consequences.

It’s you.

You find out you’re on your own for a claim because you didn’t have the coverage you thought you did.

Or you have coverage, but it’s not enough to pay for the entire amount of the claim because you didn’t buy the right type of coverage.

In either situation, you lose.

I hate it.

I hate seeing the very system that’s supposed to exist to respond during someone’s most desperate time of need, sink to a level where growth and profits are prioritized over people.

People should always come before profits.

And to be clear, there are excellent insurance companies that still operate with integrity and strong moral values.

Companies where their profits exist because they prioritize their clients.

But it might take a bit of research to find them. They’re not always the same companies that are spending billions every year advertising to consumers.

However, it’s worth the effort.

What these insurance companies lack in brand awareness and national media notoriety, they often make up for with their quality products, fair pricing and stellar claim service.

But before you get to the point of searching for the right insurance company, we need to address the fundamental issue you’re facing today.

No matter how many commercials you’re hit with trying to convince you your insurance protection is worth nothing more than spending 5 minutes to switch & save…

No matter the number of online targeted ads working desperately to sell you on the idea that providing your name and address will result in a quote for all the insurance you’ll ever need…

Just know – you’re worth more.

You’re worth more than 5 minutes.

Your insurance protection is far too important to only consider your name and address.

When done right, getting your insurance protection set up should take more than 5 minutes. And it’ll require more than a few pieces of information.

But isn’t something as important as protecting your financial future in the event of a complete & unimaginable catastrophe, worth it?

If not, stop here.

If so, here’s your roadmap to make sure you actually get what you think you’re getting when you buy your insurance.

1. Recognize the Greed

Next time you see the TV commercial imploring you to spend 5 minutes so you can save 15% on your insurance, just know the commercial isn’t about your wellbeing.

It’s about your money.

And the unrelenting desire to separate you from your money. Regardless of what’s in your best-interest.

Do you know what it’s not about?

It’s not about finding you the right protection for your family, or your business.

It’s not about thoroughly reviewing the numerous options available to you so that you can make an educated decision based on your needs, and your budget.

And it’s definitely not about discussing the advantages and disadvantages when comparing one insurance company to another.

So as best you can, endeavor to tune out the bombardment that billions in ad spending will buy with the sole purpose of convincing you that your insurance protection is a commodity.

Your financial future is worth more than 5 minutes.

2. Insurance ≠ Commodity

I get it – billions in ad spending over the past several decades aimed at convincing us that all insurance is the same, and we just need to buy it off the grocery shelf like we would bag of flour – that doesn’t get undone overnight.

However, insurance is anything but a commodity.

I recently delivered a policy to a new client… it was 363 pages.

That’s 363 pages of a legal contract.

A policy that’s designed to protect a small business, it outlines everything the insurance company will pay for… and several types of claims the insurance company will not pay for.

What do you think the chances are that this 363-page policy meets the definition of a commodity, and is a ‘mass-produced, unspecialized product’?

The fact is, I’d argue insurance is the exact opposite of a commodity.

It’s a highly specialized, complex product.

Which is precisely why I’m on this mission to educate consumers about the nasty pitfalls of the race to commoditization, before it’s too late.

Your best weapon against the commoditization of a product you very much need to function properly, is knowledge.

Armed with the knowledge that insurance is massively complex, and should be tailored to your unique situation, you can tackle the purchase of it like you would any other specialized product.

Consider when you’re buying a new car. You likely look for certain features, whether safety, convenience or performance. Perhaps the best combination of all three. Once you know exactly what you want, you can find the best price based on the options you’ve selected.

It’s not that your budget is irrelevant, it’s still hugely important.

But you likely don't buy the cheapest car you could find like you’re grabbing a bag of flour off the grocery shelf.

So why is insurance so backwards?

Why is it so often purchased like a bag of flour?

The features and options are never considered.

Until there’s a claim.

Simple answer: that’s the power of billions in ad spending, decade after decade, designed to convince you that insurance is nothing more than a commodity.

And now you have the knowledge. You know you deserve better.

So where do you start?

3. Unbiased Advice

Once you’ve recognized the greed hiding behind today’s world of insurance advertising, and you’ve acquired the knowledge that insurance is anything but a commodity, you still need a solution to make sure your family or your business is protected.

Enter the Independent Agent.

What’s the difference between and Independent Agent and any other agent?

An Independent Agent is just that – Independent.

Not employed by an insurance company, but rather operating entirely separate with the sole purpose of providing consumers with the unbiased advice they need to make an educated decision.

Full disclosure: I’m an Independent Agent.

But just as I stated at the beginning of this article, I’m not here to sell you anything.

Not an insurance product.

Not why you should buy your insurance from me.

The fact is, there are many Independent Agents out there.

And because they’re not employees of an insurance company, they’re free to do what’s best for you.

As it should be.

Which is why I’d highly suggest you locate an Independent Agent you know and trust, and invest the time to answer the questions they’ll have for you.

It’ll likely take more than 5 minutes.

In fact, you should want it to take more than 5 minutes. If it does, that means your Agent is doing the right thing for you, and making sure that highly-specialized product – that’s not a commodity – is tailored to your unique situation and specific needs.

Once your Independent Agent knows the options & features you need, the search for the best insurance company to fulfill those needs can begin.

Remember, your Independent Agent does not work for an insurance company. Instead, your Agent represents many different insurance companies which means they’re free to select the one that provides the best option for you based on the quality of the coverage, the claim service provided, and a fair price.

And don’t be surprised if the insurance company your Independent Agent recommends is one you’ve never heard of. It might just mean that company spends more of its money paying claims instead of buying national TV ads.

Conclusion

My goal with this article was to help educate consumers that for far too long, have been sold a story that their insurance protection is relatively unimportant. That it’s a buying decision reduced down to a time limit where anything longer than 5 minutes means you’re wasting your time.

Unfortunately, I’ve witnessed the devastating consequences with this approach.

I’ve seen the tears in people’s eyes when they found out that policy they bought online wasn’t going to do what they thought it was after they had a claim.

The path to ending the greed & commoditization that’s destroying people’s financial lives has to start somewhere.

My hope is, this is the first step – no matter how small and seemingly insignificant when compared to billion-dollar advertising budgets – toward achieving that goal.

Doing the right thing means putting people before profits.