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New Jersey Broker Insurance
Choosing An Agent
Today’s insurance marketplace is forcing many businesses to examine both the prices they pay for their products/services and the companies that they buy them from. Insurance and risk management services are no exception. Traditionally, many midsize companies have held the belief that the best way to drive down costs is by conducting a bid process. Under this process, multiple Agents are invited to compete and submit bids for the company’s insurance. In today’s insurance marketplace, the bidding process is no longer the best way to achieve the best results.
Weaknesses in the Bid Approach
Pricing obtained through a bid process rarely represents the best the marketplace will offer.
In today’s competitive market, underwriters don’t have time to give every account their best effort. They are forced to choose the new business opportunities they work on very carefully.
If an underwriter sees that more than one Broker or Agent is approaching them for a bid, the underwriter typically feels the chances of winning the business are slim. Therefore, the underwriter has less motivation to give the account their best effort.
Diminished Leverage in the Marketplace
Some buyers assign specific Agents to specific markets. While this does reduce some market chaos, it also could prevent an Agent who has the strongest relationship with a specific market from going to that market. Thus limiting the ability to negotiate the best possible terms leveraging quotes against each other.
Increased Potential for Coverage Gaps or Deficiencies
When Agents are asked to bid, coverage is often compromised to reduce the price. All too often, it becomes the job of the client to then decipher the coverage gaps or deficiencies and makes it very difficult to then compare proposals on an apples-to apples basis.
Often the Focus Shifts from “Total Cost of Risk” to Premium
In a competitive bid situation, the underlying emphasis becomes bottom line premium cost. While it is important to consider the premium cost, it more important to understand and stay focused on the “total cost of risk”. “Total cost of risk” considers all those costs associated with a company’s insurance and risk management program. These expenses include smaller losses that fall below the company’s deductible or the lost productivity and retraining expense. Often, premium cost is only a percentage of a company’s total insurance cost. Many times, the lowest premium now will result in a higher total cost in the future.
How to Get the Best Results?
Businesses should look at the selection process in two steps. The first step is choosing the Agent and the second is picking the insurer. Some buyers may have concerns that the sequential approach slows and complicates the process. In fact, it streamlines the process. By selecting a Agent first, they handle much of the fact gathering, coordination and analysis that would normally fall to the buyer.
Choosing the right Agent
All Agents are not the same. To help obtain the best results for the company the buyer should develop an evaluation process to compare the potential Agents who are competing for the business. By doing this, the buyer will have the opportunity to focus on what each Agent can bring to the table and which one can best respond to the company’s needs.
- Commitment to Learning about each Client’s Individual Needs
- Ability to Establish a Risk Management Plan
- Capability to put an Established Risk Management Plan to Action
- Scope of Risk Management Services provided
- Willingness to be Produce Accountability Reports to Determine the Plan is Working
- Cost of Risk Management Services
- Knowledge of the Insured’s Industry
- Quality and Depth of Personnel
- Leverage in the Marketplace
- Expertise Proving Quality of Service
- Relationship with Carriers
- Ability to Communicate Clearly and Concisely
The Agent’s responsibility is to:
- Manage the Market Competition
- Structure the Proposals in a Manner that Clearly Displays the Difference’s in the Proposals
- Communicate Identical Information to each Market
- Present the Client’s Business to the Market in the Most Effective Way
- Use their Knowledge and Relationships to Negotiate the Optimum Terms and Conditions from each Carrier
- Provide Additional Insight on Carriers’ Strengths and Weaknesses
Relationship with your Carrier
Underwriters are no different than any other service provider. They form relationships and devote greater resources to clients/prospects they know, trust and have a successful track record with. If a strong partnership exists, an organization will realize the benefit of that relationship financially in premium terms.
Conclusion
Competition between Agents as well as insurance companies is a good thing for a company and an essential way for businesses to learn what is available in the marketplace. However, to gain the best competitive edge and the best value, a company must have properly managed the Agent competition. Once a Agent is selected, the Agent can work with the Buyer to conduct competition amongst the Carriers.
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