Are you a business owner approaching a renewal of your business insurance and you’re frustrated by the shopping for business insurance experience, and you’re dead set on looking for one broker instead of multiple brokers in the quest to find the best deal?
Or maybe you’re a first-time buyer of business insurance and you’re also compelled to use multiple brokers to find a good deal on insurance.
In this video and post, I’m going to pull the curtain back and give you an industry insider’s peek into how the insurance quoting game works and why working with one qualified broker is your best strategy than the traditional multi-broker bidding process
This is one part of a 3 part series where I dissect the business insurance process and give you insider tips on how to get the best deal on your next renewal strategically.
This video was created in January 2023 when most business owners already have experienced some rate increases in their insurance for the past few years and will likely see significant increases over the next year or two, based on dramatic increases in reinsurance costs.
I hope this is timely and useful information.
Okay, first, let’s set the stage. In the past you may have quoted your account every few years, engaging 2 or 3 brokers to go out to the market and get you some pricing options.
It’s a bit of a grueling process and at the end of it, a few days before your renewal these three brokers anxiously come to your office to pitch their proposals.
You take in all the info and what happens most of the time?
In my experience, 90% or more of the time, when a business owner shops the market, they do get some pricing relief, but they stay with their incumbent broker.
Seems odd to go through all that effort and in the end stay where they are my thinking on this is that they do so because the devil they know is better than the devil they don’t know so they give their incumbent broker a “last look” at pricing and if they can match it, they stick with them.
Unfortunately, what’s going on behind the scenes in this traditional process is that there’s been no deep analysis into coverages, no strategic insight into claim history or risk control elements, no discussion of service expectations, and worse there’s typically been some depletion of coverage as brokers hack away at the policies in an effort to reduce costs.
Not the ideal result.
I bet you see the shopping or bidding process is confusing, frustrating, time-consuming, and inefficient. In my opinion, it’s also totally ineffective.
Well for three reasons.
The first is that the insurance marketplace has changed dramatically.
There’s been massive consolidation of insurance companies and insurance brokers over the years which means that most good brokers are larger, and they represent most of the good insurance companies out there.
In the past the thought was that business owners had to engage 2 or 3 brokers to make sure they were getting access to all the best insurers – that’s no longer valid since any one broker that’s good can singly get to all the best insurers.
Second, having multiple brokers quoting your account, short circuits the biggest hammer in your toolbox and that’s leverage.
Let me show you why it’s a good idea to have only one broker
Assume you have three similar brokers you want to work with on your account renewal.
Broker 1 2 3 And there are 5 insurance companies – I know this is an oversimplification, but the same results hold true whether it’s 5 insurers or 20.
Broker 1 goes to companies Broker 2 goes to xx companies And broker 3 goes to xxx companies
You’ve probably seen this before when letting your account out for bid.
What happens next?
All 3 come back asking you to sign broker of record letters to give them authority with each different insurer.
You may think, okay I’ll allocate 2 insurers to broker 1, two insurers to broker 2 and the remaining one to broker 3.
Seems logical – unfortunately you’re really giving away leverage here, as no one broker can fully leverage negotiations.
What’s going on behind the scents that you’ll never see is that the underwriters at each of the companies know you’re out to market, shopping for price, and maybe they’ve seen your account every couple of years and never wrote it – so they think, I’m never going to win this deal – no one has control, it’s just going to be a waste of time so they quietly slip your account submission to the bottom of their already overloaded pile of work, never to see the light of day.
Whatever happens next with the broker of record letters really doesn’t matter.
The die is cast, you’ve given up your leverage and it’s a loser’s game from here as most underwriters are unwilling to commit the time and resources to do their best job for you since they feel like they don’t have a fair shot at winning the business.
Now, what do you do?
Fresh SHEET with one broker
This is where the one Broker Method comes into play.
When you control the process and focus your negotiating leverage with one skilled broker, they will get the right underwriters engaged and interested in wanting to write your account competitively.
This will result in you maximizing the outcome of a competitively priced deal with robust coverages.
Now, for those decision-makers that have been deploying the traditional bidding process for years, I know that’s a hard habit to break.
Maybe you’ve kept your agent honest, and seen lower premiums from it, but there’s a reason the top insurance brokers in the country don’t participate in RFPs or shopping exercises – they know it’s a losing proposition for them and the client.
In fact, I won’t get involved in a bidding exercise because my experience is identical to the diagram I shared with you.
I want to maintain control and leverage, so I get the best results for my clients.
If the best results are something you’re looking for on your next renewal – then let’s set aside some time where can chat about how we can go about doing that.
It’s never too early to start that conversation so you can book a call on my calendar.
Finally, I hope you’ll take a look at this video next to broaden the discussion on making your next insurance renewal, your best.