choosing a broker
TRANSCRIPT
PROPOSAL OF INSURANCE
For
Finest City Acoustics, Inc.
August 4, 2015
Choosing a Commercial
Insurance Broker
Reducing overpayment of premium
Maximizing coverage
Are You Comparing Apples To Apples?
Brown & Brown Insurance Brokers of Sacramento, Inc.
CA License #: 0H38004 | NYSE: BRO
5750 West Oaks Blvd, Suite 140, Rocklin, CA 95765
CHOOSING A COMMERICAL INSURANCE BROKER
Confidential and Proprietary
Page 1
Maximize the risk transfer model and reduce overpayment of premium
Selecting a commercial insurance broker is a decision that can have a meaningful impact on the
bottom line. However, the process can be difficult to manage. In order to make the best choice
possible, Brown & Brown recommends a company has a complete understanding of the process
when seeking to evaluate or change brokers. This white paper offers a clear point-of-view on the
following:
• Common Concerns with Business Insurance
o Overpayment
o Painful Process
o Underwriters Receiving Different Stories
o Limited Options & Last Minute Renewal
THE PROBLEM
It is virtually impossible to determine every potential cause of loss. If we could do that, then we
would only buy insurance for those causes of loss we have identified. Insurance policies are
restrictive in nature; they protect insurance companies NOT policyholders.
Financial executives typically have responsibility for managing a company’s business insurance.
In many instances, the task is overly complicated because the process is not transparent and
comparing quotes is difficult due to a lack of information provided to the underwriter. In most
cases only a transactional limit to limit comparison is performed. However, limits of insurance
DO NOT determine coverage. Coverage is found within the policy language.
COMMERCIAL INSURANCE MARKET & BIDDING PROCESS
Insurance I-90 Example
• I-90 = traditional mid-market bidding process used by small
and medium sized companies.
• A fast-paced highway focused solely on buying insurance.
• Fast Lane starts about 90 days before the policy renewal with
multiple agents and brokers on the road, leading to
congestion and confusion in the marketplace.
• Every business has risks (potholes that need attention and
repair) but I-90 has no stops or exits to identify measure and
mitigate risks.
• Due to the limited time frame, frantic pace and the amount of
work to get insurance quotes, these potholes go unaddressed
or unnoticed.
• Renewals delivered late or at the last minute. Limited time to
review.
• Large Companies DO NOT play this game!
CHOOSING A COMMERICAL INSURANCE BROKER
Confidential and Proprietary
Page 2
Shotgun Approach to Insurance
INSURANCE COMPANY A
INSURANCE COMPANY B
INSURANCE COMPANY C
INSURANCE COMPANY D
INSURANCE COMPANY E
Broker B
Broker C
Broker A
REJECTED
How It Works
Multiple Agents Quote Every 2-3 Years
Quotes Received Last Minute
Current Agent Gets Last Chance To Lower
Coverage Remains With Same Carrier
Bid Packages and Time To Complete
Focus Is Strictly Based On Price
Result
Agents Telling Different Stories
Delay Game – Last Minute Choice
Bidding vs. Consultative
Underwriters Get Cold Feet
Extra Work For Business Owner
Focus On Limits Not Policy Language
Insurance companies don’t like to receive an application on the same risk from several
Agents. Information on these applications is rarely the same, and they know the key concern
is price. Price being important does not determine true value. Value is the best possible policy
for the least amount of money.
Insurance companies are looking to develop long term relationships with their accounts, to
deliver the best value and the broadest coverage warranted. Many will refuse to quote
“shotgun” applications.
This approach usually results in failure to compare “Apples to Apples.” (Policy language
determines coverage, not limits.)
CHOOSING A COMMERICAL INSURANCE BROKER
Confidential and Proprietary
Page 3
One Broker Working for YOU
LIBERTY MUTUAL
HARTFORD
BERKSHIRE
TRAVELERS
SELECTIVE
COMPREHENSIVE
SUBMISSION
Broker Selection
Professional Criteria
Like CPA / Attorney
Industry Knowledge & Experience
Reputation
Market Access
Resources
Support
Results
You Get Control of the Process
Leverage Markets
Clear Story Told To Marketplace
Eliminates Overpayment
Creates Feeding Frenzy
No More last Minute Quotes
“Professional broker selection allows one QB to control the process on your behalf. A consolidated submission is prepared and your story is told consistently to our underwriters, just as Fortune 500 companies purchase insurance.”
JM – Liberty Mutual Insurance Company
CHOOSING A COMMERICAL INSURANCE BROKER
Confidential and Proprietary
Page 4
SELECTING A BROKER
When meeting with possible brokers, it is critical to have adequate lead time-time to avoid
making rushed decisions. Selecting a broker should be done off renewal cycle, and not within 90
days of the renewal. Additional time will allow for both you and the broker a greater opportunity
to prepare.
90 Days
180 Days
270 Days
Renewal Date
Insurance Cost
Reflective of RPI
&
Loss Ratio
Improvement
&
The Story
Analysis
Risk
Mitigation
Insurance
Procurement
Insurance Coverage & Policy Language
Audit
Difficult / Technical / Professional Services Easy / Low Skill
Renewal Date
The transactional nature of insurance during the 90 day renewal process allows for improper
insurance placement. The transaction of insurance is important. However, when selecting a
broker, the broker should have a process for performing and showing you the
Difficult/Technical/Professional skill they have to offer. This is accomplished by having the
broker perform an analysis of your current risk program.
CHOOSING A COMMERICAL INSURANCE BROKER
Confidential and Proprietary
Page 5
VS
• I-90 = Traditional middle market
bidding process.
• Focused solely on procurement of
insurance. The heaviest traveled
route in our industry.
• Begins 90 days before the policy
renewal when there are multiple
agents and brokers on the road, this
often leads to congestion and
confusion in the marketplace.
Chaos and confusion!
• Every business has risk issues;
potholes that need attention and
repair. Sadly, I-90 has no stops or
time to identify measure and
mitigate this risk.
• Due to the limited time frame,
frantic pace and the amount of work
to get insurance quotes these
potholes go unaddressed or
unnoticed. Wrong focus!
• A Shift to The Large Market
Buyer’s Game.
• The longer route requires good
brokers to be different and go
beyond the insurance renewal
process and navigate the various
regions of your organization.
• While traveling on the back roads of
your business, good brokers may
encounter potholes and see the need
for guardrail installation (proactive
and preventative measures).
• Unlike I-90, there is ample time to
identify measure and mitigate these
hazards with daily improvement.
• A broker’s process provides should
be a road map and strategic
insurance plan for your business as
we serve as your “outsourced risk
manager”.
CHOOSING A COMMERICAL INSURANCE BROKER
Confidential and Proprietary
Page 6
CHANGING BROKERS
Broker of Record
If you decide to change brokers, there are procedures which need to be followed. However, this
depends on the brokers recommendations. If the broker of your choosing decides the current
carriers are the best fit, but are not being utilized to their fullest a Broker of Record will be
needed. The letter will need to be printed on a company’s letterhead, and signed by the company
decision-maker. Once the letter is sent to the broker they in turn will forward the letter to the
insurance carrier letting them know you are naming the new broker as your insurance
representative.
Once the carrier receives the letter, there is typically a 10-day waiting period. During this time,
the carrier will inform the current broker of the clients desire to change brokers. We encourage
clients to contact the prior broker to let them know of the upcoming change. The client can share
as much as they want about the reasons for the change.
New Carriers
If you decide to change brokers, and the new broker decides there are better options available to
protect your business, and reduce overpayment of premium standard insurance placement will
follow. This is why the transaction of insurance is important. However, it is the byproduct of the
work performed before approaching insurance carriers. In some cases a Broker of Record may be
required to access carriers the prior broker approached, but it did not maximize coverage.
CONCLUSION
A single broker representing your business can be an effective solution for maximizing coverage,
and reducing overpayment of premium by negotiating with carriers in a more effective manner.
They should be designing and negotiating an insurance program to meet your needs, handle
complex claim situations, and proactively address ongoing business needs. Essentially, your
broker should be acting as your outsourced risk manager with your business best interest as a
priority.