RISK SERVICES—I’ve heard the Risk Managers in my office mention more than once that “too much shopping around” with your commercial insurance policies is a bad idea.
At first, I was just curious as to why. But then I thought business owners and top managers might be interested, as well. So, I asked them to explain.
Here are several reasons why Risk Managers advise against taking your policies “to market” on an annual basis.
Why You Shouldn’t Market Too Often
1) The Underwriters And Agents Don’t Pay As Much Attention To Your Account.
Prep work on commercial insurance accounts takes time. Agents and underwriters may not want to compile all the information necessary to quote an account, if they feel their efforts won’t be rewarded.
2) Your Account Is Just Out There Too Much And Nobody Will Take You Seriously.
Agents could believe you’re just looking at the rest of the market and have no intention of changing agents. They may feel that you just want to look at the available policies, but you’re not going to buy anything.
3) It ‘Cheapens’ The Account. It’s Not Worth Anything.
You cheapen the value of your account if you bid it out every year or two. Agents can decide to focus on other accounts that don’t bid as often or they may choose to not put as much time into your account.
Do This Instead — Accept Bids Every 3 to 4 Years
If you only bid out your commercial insurance account every three or four years, for example, then agents and underwriters will understand that this is their opportunity to quote your insurance.
And they’ll realize they have a real chance of securing the account.
“From a Risk Management standpoint, we advise our customers to only bid out their commercial insurance accounts every three to four years, unless there is a complete turnaround in the market or another direct reason to look at more coverages or policies,” said Walter Haney, Sr., of American Risk Managers, Inc.
Mr. Walter also shared some advice on reasons to make policy changes, how many agents to get involved in the quote process and some best practices for bidding out accounts.
Have Specific Reasons For Change
All of your insurance purchasing should be based on coverage needs.
“There needs to be a specific reason for buying a particular type of insurance,” Mr. Walter said.
For Example, Risk Managers can survey your operations to check for risk exposures and then design a program to fit your company’s unique needs.
Mr. Walter also noted that there needs to be a reason to secure different pricing.
“If there’s some reason to believe that the pricing is going to go up, then certainly you want to shop that policy,” he noted. “But we don’t believe you should be changing agents or companies just to be doing it.
“We think there has to be a meaningful difference in pricing. And to us, that’s 10 percent. There would have to be a 10 percent savings opportunity for us to advise a client to change agents.”
Pricing Is Not The Most Important Consideration
Also, regarding pricing, Mr. Walter noted that it’s neither the least important reason to change, nor the most important consideration.
“The most important thing is coverage,” said Walter Haney, Sr. “If you have a claim, is it covered? If it’s not covered, it doesn’t matter what you paid for it. You don’t have anything.”
Besides coverage, other important considerations to keep in mind are company reputation, agent experience and how well the policy is written.
Another reason for a change mentioned by Mr. Walter would be if your insurance company was closing or relocating.
“If your company is leaving the area, then you want to be ahead of that to shop the insurance,” he said. “But if everything remains the same, the best practice is to have your account quoted every third year.”
How To Go About It
Establish Values & Limit The Number Of Agents
The first step in bidding out a commercial insurance account is establishing the values of all your properties and equipment.
(Again, we’ll recommend getting a Risk Manager involved, but a detailed list of how to prepare your accounts can be found here.)
Mr. Walter noted that establishing values and publishing specifications allows every agent involved in the bid process to have an equal chance.
He also explained that you should limit the number of participants to three or four independent agents.
Why no more than three or four?
“You destroy the market and overextend it when you go overboard,” he said. “Three or four agents will give you a good search of the market and allow those agents to be able to put together a complete proposal for you.
“Anything over that is just superfluous and is of no real value to you.”
Work Off Assigned Markets
While preparing your specifications, you can invite the agents you want to be involved to submit the markets they’d like to use — IF they get the account.
(Examples of markets include a company that handles property coverage, a company that offers workers’ compensation coverage, and another company that deals with automobile coverage.)
You begin by sending participating agents a market request form, so they can pick their first, second and third choices of markets.
SEE EXAMPLE BELOW
Mr. Walter explained, “If I was requesting markets, I would list as my number one preference the market that I felt would best provide the coverage for that account. You’re looking for an insurance company that does a good job with that particular type of business.”
By submitting their markets on a preferred basis, you’ll then, ideally, be able to match each agent up to their number one market — the one they really want.
“The agents are saying, in essence, ‘If I got the account, these are the markets I would like to have’,” Mr. Walter said. “It doesn’t always work that way, but that’s the idea behind it.”
You (or your Risk Manager, if you have one) will then assign all of the markets to specific agents.
Agents are advised to only work off of assigned markets and not approach any company until and unless they’ve been assigned this particular market.
After markets are assigned, you’ll need to allow the agents approximately 90 to 120 days to obtain their quotes.
Before presentation time, you’ll want to create some type of bid form on a spreadsheet, so you can compare all of the companies, the coverages, and the pricings.
Mr. Walter recommends that you have all the agents present their pricing and proposals at least 15 days prior to the expiration date of your policies.
“That way, if you do make a change, you have time to get your insurance certificates. And it’ll be a more orderly change,” he said.
Hopefully, you’ve learned a little bit about “what not to do, what to do and how to do it” regarding taking your commercial insurance accounts to market.
Of course, none of these suggestions are meant to be legal advice. You’ll always have the best results (and bigger savings) by consulting with an Independent Risk Manager.
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(Photo Credit: Chazz H.)