How and Why to Select Your Commercial Insurance Broker

October 7, 2022

A business Risk Advisor is critically important in an organization’s financial protection. Business owners should view these professionals equally as their other business advisors, such as attorneys and accountants.

When it comes to insurance, there are two fundamental approaches that are best described as the traditional “quoting/bidding” process and value-based broker selection.

The Traditional Quoting/Bidding Process...

Here is how the traditional quoting process typically works:

• Three or more agents are selected by a company to submit a “quote.”

• Each agent will ask for a list of pertinent information.

• The company then assigns markets. Agents will jockey for the same ones. However, each market will only release a quote to one agent.

Note: It’s important to note that assigning markets creates an uneven playing field for all agents involved and allows the insurance company with the “best” premium to select your agent. Ironically, most decent-sized insurance agencies have access to the same insurance carriers. This means the agent assigned the most competitive carrier ends up with the lowest quote. Again, the insurance carrier has selected your agent.

• Each agent will send the information they gathered (is it all the same? Is it all correct?) to the insurance company underwriter for a quote.

• After putting together proposals, each agent will want to make a presentation.

Note: Agents will jockey to be the last to present in hopes of getting one more shot at sharpening their pencils and getting the lowest price!

• The business is then left to decipher the differences in coverages, exclusions, and special language in each proposal (assuming the detail is there). This usually results in an “apples to oranges” comparison.

• The company is left to make a transactional decision based on price.

To illustrate, let’s compare two different processes of buying a suit. Quoting is like buying a suit off the rack based on the lowest price. The Broker Selection process is like having a custom-tailored suit made. It will provide a higher quality product that fits better and will eventually be at a lower cost than the basic suit everyone else can buy at the store.

Value-Based Broker Selection, or Choosing a Risk Advisor, not an Agent!

Many business owners are unaware of the resources and services they should receive as part of a solution-oriented partnership with a Risk Advisor.

Another Way. Instead of taking the traditional approach of selecting insurance based on price alone, interview brokers are known to utilize an advisory approach. Look into the process, products, and services they provide. Your insurance agency should have licensed professionals who are proven performers in impacting every aspect of your Risk Profile. Will they identify and manage your insurance cost drivers with intentional mitigation strategies? Do they have licensed professionals proven to impact every aspect of your risk profile? This includes a team of risk advisors, licensed claim adjusters, and OSHA Certified Trainers for Safety and Loss Prevention. They should also have relationships with other organizations that serve as strategic partners to help mitigate your costs. Without such resources, you’re simply buying a policy, not solutions to reduce your short- and long-term costs.

The job of your risk advisor is to help identify and manage your strategic, financial, and operational risk exposures. Insurance placement is just one part of the process known as the “Risk Cycle.” Identifying, assessing, and addressing your unique risk profile should consider where your company is at now and where it’s going in the future. Solutions aren’t created overnight. They take time to address, implement, and are constantly changing. This is much like strengthening your credit score before a major purchase. You don’t wait to increase your score at the time of purchase (Renewal Date). It takes planning and putting new initiatives in place in advance.

Let me encourage you to break out of the traditional “quote” approach to managing your cost of risk. Instead of just buying a policy, partner with a broker that takes an advisory approach and can positively impact your company. Ask around. Take time to interview and find out what they can do to bring cost and time efficiency to your insurance program.

Purchasing based simply on price at renewal can cost you a lot more money in the long run!

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Jacob Haralson VP, Oil & Gas Team Lead, R&Y Shareholder jharalson@rossandyerger.com 601-944-0961

Jacob Haralson is Vice President and Shareholder at Ross & Yerger and is the Oil & Gas Team Lead. Haralson specializes in Oil & Gas Services & Food Processing.