Some insurance consultants set their fees based upon the value they will deliver to their clients. Others don’t.
By Bill Rusteberg
Unfortunately the later rely on low pricing to gain business. The very real fear of losing business to competition due to pricing is more common than not these days because more and more insurance agents and brokers are morphing into fee based consultants with many vying for the same business.
Price-based consultants (PBC’s), who are in the majority, influence market perception thus establishing the “going rate” upon which plan sponsors rely. The problem with competing against PBC’s is one has to purposely undervalue their services to be delivered. This is not in the best interests of the client.
Some consultants price themselves so low they cannot make money……….. but do. That’s another story for another day.
Selling price alone is never a very good idea, and in some cases low prices denotes low quality in the eyes of the buyer. Buyers who recognize there is a value to be placed on “value”, on the other hand, are likely to become our partners. We have found that value can be quantifiable. We have found that a value based consulting agreement is essential and the basis to establishing a mutually beneficial long term relationship.
There should be no reason why fee based insurance consultants should not publish their fees. Yet an exhaustive internet search found only a handful who do so. All are hourly rates averaging $120-$400 with some excluding expenses such as travel. But we believe hourly rates limit what a consultant can earn (there are only so many hours in a day) and can lead to abuse. We found no public displayed fees other than hourly fees. Nor did we see fees based on a quantifiable value proposition.
Publishing our fee schedule is something to consider. Should more consultants subscribe to this kind of transparency a new transparent market dynamic may emerge. We know what real estate agents charge. We know what CPA’s charge. We know what attorneys charge. We know what health insurance commissions are. But we don’t know what fee based insurance consultants charge. Why not?
Editor’s Note:
In researching fee-based-insurance-consulting on the internet, I found this short story (author unknown) which is a great illustration of price vs value / sticker shock that often results when both interact in the mind of the buyer:
There’s an old joke about physicist Niels Bohr that illustrate this principle.
A company’s machine breaks down. The company’s owner, an old school chum of Niels Bohr, calls in the physicist for help in fixing it.
Bohr examines the machine. He draws an X on the side and says, “Hit it right here with a hammer.”
The company’s mechanic hits the machine with a hammer. It springs into action. The company’s owner thanks Niels Bohr profusely and sends him on his way.
A few days later, the owner receives an invoice from Bohr for $10,000. Shocked, the owner phones Bohr!
“Niels! What’s this $10,000 invoice? You were only here for 10 minutes! Send me a detailed invoice.”
Bohr agrees to send the invoice. A few days later, the company’s owner opens a new invoice.
INVOICE
Drawing X on the side of your machine $ 1
Knowing where to put the X $ 9,999
———————————————
Total $10,000
A consultant who knows the value of their work goes a long way in establishing their fees.
