What are your clients thinking? What would they say about the insurance industry—and about your agency—if they felt they could be really honest with you? I thought I would give it a try, and last weekend I hit the jackpot.

Recently while on a business trip I struck up a conversation with a complete stranger, a business owner named Jim. I told him I work with insurance agents, and he proceeded to give me some valuable insights into his needs and expectations for an insurance agent.

Jim is an intelligent, middle market business owner who said he pays premiums of $1 million per year. I could tell he had a high level of business acumen. I think his comments and thoughts are in the minds of many of the business owners we insure and want to insure. Some may echo Jim’s thoughts, but many will not.

We spent a couple of hours discussing insurance, risk management, and agency value propositions. Our conversation was powerful, and I believe that every agent should have the opportunity to learn from it, so I decided to share some of our discussion with the readers of Rough Notes. The quotes aren’t exact, but I think you’ll get the picture. Here goes:

Jim: “I keep hearing insurance people tell me that they have value-added services and that they can bring value to my business. But when I ask them to define value, they tell me how well they will do what they already should be doing. Returning phone calls, managing claims, analyzing insurance companies, and covering me properly are the things they have to do. I expect them to bring me real value beyond those items if they are going to be my advisor.”

Me: “That makes a lot of sense. So how would you define value?”

Jim: “Value is something that makes my business better or something worth paying money to receive. If agents would just think about it that way, they would be a lot better off. I want them to think about what they offer from the standpoint of return on investment. If they are going to do or offer something to me, what is my return on investment?”

Me: “So what items of value have you seen from the different agents that have presented to you?”

Jim: “Are you kidding me? It’s all same old, same old. They tell me they can improve my workers comp experience mod, give me safety meetings, do a loss control evaluation, manage my claims, meet with me on a regular basis, and answer the phone when I call…”

Me: “You need all those things, don’t you?”

Jim: “I would fire an agent who didn’t do those things. Yes, I want those items, but in my mind they represent a commodity. I can expect and demand those services. It seems to me that agents could provide something more. It’s interesting that they call the payment a ‘premium’ for insurance coverage and those basic services. I bet they would never rename it a ‘bargain.’”

Me: “Okay, so you want more. What do you want from an agent or broker?”

Jim: “I don’t know what I want. Maybe I want someone to tell me what I don’t already know. Maybe I need someone to help me with the real problems in my business that relate to risk. I’d like an agency to actually measure the results of what it does. I’ve never seen an industry that offers less accountability than insurance agents. When rates are going down they take credit for it, and when rates go up they blame the insurance companies. I just recently found an agency that is willing and able to measure the results of what it does for me. That has been a nice change.”

Me: “What are some other issues you want help with?”

Jim: “Again, I’m not sure. I can tell you that when I come to work every day I am most concerned about satisfying clients, getting productivity from my employees, and making a profit. It seems like a lot of risks exist in those three areas. Right now with health care reform and a slow economy, I am most concerned about getting the right people, keeping the right people, and making sure those people are productive. I guess I’m saying that I have a lot more risk than an insurance policy can cover. With all the clients and business an insurance agent has, and all the things the agent knows and sees in those other businesses, I think they should be able to give me advice beyond an insurance policy.”

Me: “It sounds like people issues are your biggest concern. If you could ask an agent for anything in terms of non-insurable risk support, what would it be?”

Jim: “I need to get a return on human capital; that’s the key. Give me guidance on preventive strategies to prevent workers compensation claims. Give me insight and strategies to navigate through the challenges created by health care reform. Help train my people to be more productive. Insurance agents see where and why claims occur; tell me what I don’t already know and help me avoid claims and fines in the first place. I will pay for it. Agents call themselves risk managers, but all they know how to do is transfer the risk to an insurance carrier. If I don’t get a good return on human capital, I’m out of business. It doesn’t matter if it’s a work injury, a lazy employee, or simply the wrong person on the bus, I’m out of business if I don’t get a return on the investment I make in people.”

Me: “Sounds like you’re looking for a human resource company, not an insurance agent.”

Jim: “Not necessarily. I have an HR manager, and I get HR consulting advice. But HR and risk management go together. I need my supervisors to be trained in the best techniques to prevent safety-related claims and employment practices liability issues. Hiring the right people and making them productive are the biggest financial risks I have to deal with in my business today.”

Me: “In my work, I see quite a few agencies that offer some of those services. Have you asked your agency if it can do some of those things?”

Jim: “I get presentations about services every time an agent gives me a proposal. They show me long lists of the services they offer. It seems like insurance agents get paid by the pound. Yes, many of them offer some of the services I’ve mentioned. But they aren’t proactive about assessing what I need, and they don’t have the business acumen to proactively bring those services to me.”

Me: “Are you saying that you have to ask for those services?”

Jim: “I can’t tell you how many times I’ve sat in a renewal meeting where my agent shows me the list of services he and the insurance company offer and I just get angry. I get angry because I see the services I didn’t take advantage of in the previous year because I forgot the agency had the service. Sure, I share responsibility in not asking for those services, but shame on the agent as well. If he understood my business better, he would help me plan and schedule those services in my business. If he were a true advisor to my business, he would find a way to give me what I really need to prevent losses and reduce my risks.

Me: What if your insurance agent came to you today and told you that he was going to be able to provide all that you just suggested and more? What if he brought you a complete value proposition? What if he advised you on things you didn’t know and helped you avoid and mitigate risk? What would that mean to you?”

Jim: “I want a professional advisor, but I don’t think anyone in my area has that skill at this point. I haven’t met an employee benefits consultant who even knows what I do in my business. How can they help me get a return on human capital?”

When Jim was expressing his thoughts, I was most surprised by his observations about risk management. I was also surprised by his lack of understanding of the extensive help that agents can offer in risk management.

Jim was saying that he wanted help with business risk as much as he wanted help with hazards. Insurable risks have a direct relationship with non-insurable business risks. He was able to see the connection, but he doesn’t see our industry solving that problem right now.

Jim told me at the end of our conversation that he would be happy to pay for risk management if it helped him pay less for risk transfer. He went on to say that he would probably be willing to pay more money for good business risk management advice.

I think Jim’s comments point to a great opportunity for those agents who are willing to differentiate themselves and actually provide value to their clients.