Choosing a Broker

The Problem

Apple_1It is virtually impossible to determine every potential cause of loss. If we could do that, then we would only buy insurance for those causes of loss we have identified. Insurance policies are restrictive in nature; they protect insurance companies NOT policyholders.

Financial executives typically have responsibility for managing a company’s business insurance. In many instances, the task is overly complicated because the process is not transparent and comparing quotes is difficult due to a lack of information provided to the underwriter. In most cases only a transactional limit to limit comparison is performed. However, limits of insurance DO NOT determine coverage. Coverage is found within the policy language.

 

 

 

The Problem

Commercial Insurance Market & Bidding Process

Insurance I-90 ExampleI90_2
•I-90 = traditional mid-market bidding process used by small and medium sized companies.

•A fast-paced highway focused solely on buying insurance.

•Fast Lane starts about 90 days before the policy renewal with multiple agents and brokers on the road, leading to congestion and confusion in the marketplace.

•Every business has risks (potholes that need attention and repair) but I-90 has no stops or exits to identify, measure and mitigate risks.

•Due to the limited time frame, frantic pace and the amount of work to get insurance quotes, these potholes go unaddressed or unnoticed.

•Renewals delivered late or at the last minute. Limited time to review. Sound familiar?

•Large Companies DO NOT play this game!

Why not change the game you’re playing?

 

 

 

Shotgun Approach to Insurance (Shopping the Market)
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Insurance companies don’t like to receive an application on the same risk from several Agents. Information on these applications is rarely the same, and they know the key concern is price.

Price being important does not determine true value. Value is the best possible policy for the least amount of money. Insurance companies are looking to develop long term relationships with their accounts, to deliver the best value and the broadest coverage warranted.

Many will refuse to quote “shotgun” applications. This approach usually results in failure to compare “Apples to Apples.” (Policy language
determines coverage, not limits.)

 

How It Works Result
•Agents Telling Different Stories •Multiple Agents Quote Every 2-3 Years
•Delay Game – Last Minute Choice •Quotes Received Last Minute
•Bidding vs. Consultative •Current Agent Gets Last Chance To Lower
•Underwriters Get Cold Feet •Coverage Remains With Same Carrier
•Extra Work For Business Owner •Bid Packages and Time To Complete
•Focus On Limits Not Policy Language •Focus Is Strictly Based On Price

One Broker Working for YOU
 

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Broker Selection Results
•Professional Criteria •You Get Control of the Process
•Like CPA / Attorney •Leverage Markets
•Industry Knowledge & Experience •Clear Story Told to Marketplace
•Reputation •Eliminates Overpayment
•Market Access •Creates Feeding Frenzy
•Resources •No More Last Minute Quotes

 

 

 

Selecting a Broker
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When meeting with possible brokers, it is critical to have adequate lead time-time to avoid making rushed decisions.

Selecting a broker should be done off renewal cycle, and not within 90days of the renewal. Additional time will allow for both you and the broker a greater opportunity
to prepare.

The transactional nature of insurance during the 90 day renewal process allows for improper insurance placement. The transaction of insurance is important.

However, when selecting a broker, the broker should have a process for performing and showing you the Difficult/Technical/Professional skill they have to offer.

This is accomplished by having the broker perform an analysis of your current risk program.

 

 

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• I-90 = Traditional middle market bidding process. • A Shift to The Large Market Buyer’s Game.
• Focused solely on procurement of insurance. The heaviest traveled
route in our industry.
• The longer route requires good brokers to be different and go
beyond the insurance renewal process and navigate the various
regions of your organization.
• Begins 90 days before the policy renewal when there are multiple
agents and brokers on the road, this often leads to congestion and
confusion in the marketplace. Chaos and confusion!
• While traveling on the back roads of your business, good brokers
may encounter potholes and see the need for guardrail installation
(proactive and preventative measures).
• Every business has risk issues; potholes that need attention and
repair. Sadly, I-90 has no stops or time to identify measure and
mitigate this risk.
• Unlike I-90, there is ample time to identify measure and mitigate
these hazards with daily improvement.
• Due to the limited time frame, frantic pace and the amount of work
to get insurance quotes these potholes go unaddressed or unnoticed.
Wrong focus!
• A broker’s process provides should be a road map and strategic
insurance plan for your business as we serve as your “outsourced
risk manager”.

Changing Brokers

Broker of Record & Selecting a Broker

If you decide to change brokers, there are procedures which need to be followed. However, this
depends on the brokers recommendations. If the broker of your choosing decides the current
carriers are the best fit, but are not being utilized to their fullest a Broker of Record will be
needed. The letter will need to be printed on a company’s letterhead, and signed by the company
decision-maker. Once the letter is sent to the broker they in turn will forward the letter to the
insurance carrier letting them know you are naming the new broker as your insurance
representative.

Once the carrier receives the letter, there is typically a 10-day waiting period. During this time,
the carrier will inform the current broker of the clients desire to change brokers. We encourage
clients to contact the prior broker to let them know of the upcoming change. The client can share
as much as they want about the reasons for the change.

New Carriers

If you decide to change brokers, and the new broker decides there are better options available to
protect your business, and reduce overpayment of premium standard insurance placement will
follow. This is why the transaction of insurance is important. However, it is the byproduct of the
work performed before approaching insurance carriers. In some cases a Broker of Record may be
required to access carriers the prior broker approached, but it did not maximize coverage.

Conclusion

A single broker representing your business can be an effective solution for maximizing coverage,
and reducing overpayment of premium by negotiating with carriers in a more effective manner.
They should be designing and negotiating an insurance program to meet your needs, handle
complex claim situations, and proactively address ongoing business needs. Essentially, your
broker should be acting as your outsourced risk manager with your business best interest as a
priority.