Why Aren't You Selling Insurance?

Thursday, January 2, 2020

I wish that more business owners would ask themselves a very simple question: "What will customers buy from me?"

Manufacturers often think in terms of products that roll off an assembly line. Service providers tend to focus on the labor that their employees perform.

Very few business owners, however, pay much attention to a source of value that they can provide: the acceptance of risk. A cornerstone of premium business models, risk acceptance is often considered little more than an esoteric footnote in even more esoteric business texts.

This is a problem that we need to correct.

Offering risk acceptance is a lot like selling insurance

Before we dive into the details, let's think about the typical definition of insurance. Most textbooks describe insurance policies as financial instruments used to limit catastrophic loss. In the context of this discussion, however, it would be more helpful to approach the definition from the perspective of the vendor rather than that of the buyer.

For those who sell insurance, such policies are a means of taking payments from a pool of customers and distributing a fraction of the revenues to a subset of those who paid in. Using this admittedly over-simplified definition, as long as the amount of money taken in is larger than the amount of money handed out, the insurance provider earns a profit.

Warranties, guarantees, and promises work in much the same way.

Vendor advantages

When vendors guarantee their offerings, they open themselves up to two sources of potential benefits.

What makes a "good" acceptance of risk?

Let's take a look at some of the characteristics of an ideal risk-acceptance opportunity:


Offering insurance to one's customers can be an inexpensive yet powerful means to boost credibility and pricing power. Business owners owe it to themselves to consider risk acceptance as both a competitive differentiator and a source of potential profit. There are few panaceas in the world of business, but this is about as close as it ever comes. The other one that is more obvious is. of course, contacting me for a consult.