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Why Shopping Your Business Insurance Around is Ineffective

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shopping business insuranceShopping, Bidding, Quoting, Introducing Competition.

These are all phrases to describe the same thing.  The introduction of multiple brokers to go out into the insurance marketplace to get quotes for you and see if competitive pressure in the market can lower your costs and get better business insurance.

In this post, I challenge this traditional mindset or thinking as being totally ineffective and show you why you should:

Pick your broker (or agent) first, and then let them pick the right insurance company.

Let me start by saying that the traditional bidding process of introducing two or three brokers to shop an account goes back at least 40 years to a time when the insurance distribution system was much different than it is today.  Back then, most good commercial insurance brokers only represented a handful of insurers so it made sense to bring in 2 or 3 to make sure you were well represented in the marketplace.

But two things have changed since then.

The first is that there are far fewer insurance companies today writing mid-market commercial than there were 40 years ago.  Over that time there has been massive consolidation in the number of insurance companies in the U.S.

The second thing that happened is that most good commercial brokers represent almost all of the same insurers left writing business insurance.  The distribution system has changed and insurance company representation is not a point of differentiation between insurance brokers like it had been 30 or 40 years ago.

If you’re looking for options in the market my suggestion is first to ask your existing broker

If you’re not wild about your broker or think you may have outgrown them then maybe it’s time to move on.  But I don’t recommend “hiring” three brokers to duke it out in the market for the lowest price and then buying from the one with the best deal.

Here’s why.

  1. You may end up with the wrong deal – meaning your coverage isn’t accurate.
  2. You may end up with the wrong broker – meaning they don’t have the capabilities to service you and your firm beyond just certificates, changes, and billing questions.
  3. Lastly, you may be setting yourself up for failure down the road.

The bottom line is that a professional athlete doesn’t hire 3 agents to represent them in negotiating their contract with his or her team or to find a better team to play for, if their a free agent.  They hire one agent because they know that one person has greater negotiating leverage than three.

The same is true for insurance.

 

Letting your account out to bid with two or three brokers is inefficient and ineffective, and here’s why:

  1. Multiple brokers will only confuse the market with multiple submissions to the same underwriters – often with different information and levels of detail. This is a big turn off for underwrites and leaves them scratching their heads over who has the right info and questioning the intent of the client – is price the only thing that’s important here?
  2. Multiple brokers usually only leads to more work for you. There’s no one central authority to coordinate risk control visits, underwriting questions, or similar tasks.  Does it make sense for you or your CFO to answer the same question 3 or 4 times from multiple brokers?
  3. If broker of record letters are introduced into the process then everyone feels threatened and hurt and the process loses steam. Worse, your most trusted relationship with your current broker may be tested or broken.
  4. At the end of the day, here’s what’s going to happen you’re going to get 3 different quotes or proposals. These documents will be several pages long – maybe as many as 40 pages long, filled with a lot of technical insurance information that you don’t understand.  How are you going to know which one is right or best?  It’s not necessarily the one with the lowest price.  Choose the wrong one and you put your business and your personal net worth at risk.

Is there a better solution?

There is and it starts with hiring the right broker.  It may be the agent you’re currently using, it may not be.  The biggest factor is trust.  If you trust your current agent and feel that they have a process that fits your needs for customer service, risk control services, expertise, and after the sale follow-up, then great.  Have a conversation with that agent if they don’t initiate it about 120 days before your next renewal to talk about market conditions and what you should expect.  Here’s a hint – if your current broker isn’t already doing that proactively and you have to start that conversation, you may have the wrong broker and don’t know it.

If the market is hard, and a large increase is anticipated, ask your broker, does it makes sense to go out to the market and get alternate quotes?  Do you like your insurer and don’t expect a large increase, it might make sense to stay put – this is where an expert broker is a tremendous asset.

Now, if you don’t have a lot of trust or confidence in your current broker it might make sense to find one you can trust.  I recommend asking your peers or your other professional advisors.  Often lawyers, CPAs, Bankers, benefits broker, and life insurance brokers will bring me into their clients on a recommendation or request from a client.

I recommend interviewing more than one agent to make sure you end up with someone you’re compatible with, you know they have the chops to get the job done, they have a great team behind them, and they have the tools, expertise, and resources to help you manage risk to reduce your future costs.

I can confidently say that The Coyle Group fits that criteria for most middle market clients.

Once you have the right broker, start early and discuss a renewal strategy, outline your objectives, and what your expectations are.

Want to learn more about me and my firm?  I’d love an opportunity to speak with you about your issues, your concerns and your desired results.  My contact info is above, but you can click the button below or fill out the form below so we can connect.

I’d love to chat and see if we’re the right fit for you and your situation.

Thanks!

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