The Broker Selection Process
Most people associate buying insurance like buying a car. You pick out the car you want and then have multiple sales people fight over your business to get you the best price possible. Most of the time this process works and you, the consumer, end up with a good deal for the car you want. This process does not work well when buying insurance. Let me explain why.
The first reason is your business changes every year. Some businesses change so much throughout the year that their current insurance program may not be suitable to meet their needs. In many cases, if you follow the car buying process when buying insurance you give each broker a copy of the policy and say “find me the best price”. Many times brokers are copying mistakes and old information, leaving your business vulnerable to paying for losses you thought were covered.
Here’s another reason… Did you know that insurance carriers will only provide an insurance quote to one broker? Did you also know that brokers don’t always represent your company in the comprehensive and effective mannery. They often leave valuable information out of their presentation to the insurance marketplace when they just collect policies and basic information? This affects the carrier’s ability to be more favorable in pricing. Here, look at this and let me explain how it works.
This is a very simple illustration but it outlines what happens to many businesses. Think of this illustration as a game where each broker has the opportunity to represent your business to each carrier. But when each broker submits his or her information about your business to a carrier, that carrier will no longer speak to any other broker unless you the business owner says so. I know that may sound crazy, but that is the way our industry works.
What if the best carrier doesn’t know about all the great things you do for your employees and customers? What if they don’t know about your disaster recovery plan or how you’re working to better your overall safety program to reduce the possibility of a loss? Imagine the impact on an underwriter who completely understands what you have done to prevent and mitigate risk in your business. What if with your application information, they received a full description of who you are, how you operate, and a plan to address additional risks in the future.
A broker should work with you to reduce risks within your business by implementing a risk management strategy completely tailored to you, effectively reducing your overall cost of risk, not just the cost of insurance. What about increasing the overall productivity of your business? When you effectively reduce risk within your business there is a natural increase in productivity adding to your bottom line. A 10% savings on insurance may sound wonderful, but does it have the same impact as a 10% increase to your bottom line?
The very reason you brought in multiple agents was to save money. Our industry has been trained to operate that way and has trained you to think that way. We fundamentally believe this traditional process is harmful to your business and ultimately costs you money. The next time you look at insurance alternatives, consider the impact to your business of choosing a trusted advisor to represent you to the marketplace, work with you to reduce risk in your organization, and drive dollars directly to your bottom line.