The answer is there's no way to know with 100% certainty. There are too many options in the world. No one broker represents every insurance company. On top of that, no broker has a great relationship with every insurance company so that the insurance company will make their best offer.
What you’re trying to do is maximize your odds of success. You do that by running a great negotiation system.
This might sound like voodoo. I promise you it’s not. There is a reason large companies like Marriott and Hyatt have teams committed to procurement. There are college courses that you can take to help you get better at procurement.
That’s because there is an art and a science to effectively purchasing what you need for your business, and insurance is no different.
If you’re running an effective procurement system for your insurance, you’re going to walk away with a very high probability of success that your offer is better than the market average, and it will be much less of a headache.
I may not always be the cheapest thing. There's always somebody out there that's willing to undercut the market. But it will be better than the market average.
Here’s the overline of what a good procurement system looks like.
1. Choose one broker
Most people aren’t aware how the insurance marketplace works for commercial insurance. Here are some things you should know.
For any type of business, there are usually about 4-6 insurance companies that have the most competitive offer for businesses in that space.
Most regional to national sized brokers have contracts with all those companies.
Those companies will only send a quote to the first agent who sends them an application.
Which means when you approach multiple brokers, it becomes a race to see which broker can send in an application first. It’s the equivalent of choosing your CPA based on who can file your taxes the fastest.
Further, underwriters will tell you it is very confusing to know which application to trust when there are multiple submissions with conflicting information.
This confusion doesn’t help you get a better deal as a buyer. It only creates confusion.
2. Put together a good cover letter to excite underwriting
The next thing you need to do is make sure that you have a great cover letter for underwriting. As a customer, you win when you have multiple insurance companies competing to win your account. The cover letter is how you grab them. There are somethings that you should make clear.
What's their opportunity to win your account?
What did you pay last year?
What would it need to be for you to switch?
What kind of claims did you have?
What have you done about it?
What are your housekeeping practices?
When do you need this quote by?
This information makes it easier for the underwriter to do their job. You would be shocked by how few brokers make the effort to do this for their clients. This cover letter can be the difference between a company actively engaging in account or walking away.
And once again, what you want are underwriters competing, not brokers.
3. Then review a marketing summary.
Once you put together your cover letter, after you've gone to the market and gotten quotes back, it's important to look through all the offers because you'll learn how to make yourself more appealing by listening to what underwriters have to say.
There may be small things you can tweak in your operations that'll make another company more interested. I’ve had some underwriters see a pool on a daycare’s website and get nervous. The daycare hasn’t been to a pool in years. Or they see a contractor that lists roofing, and the contractor is just hoping one day they’ll get a roofing job.
Eliminating that concern can make your business more attractive.
Or maybe there's something you need to change in your business that you can't fix this this renewal cycle. But the next time you go to the market, you could. Claims are a good example.
If you can take those things and learn from them, it's going to help you market yourself better in the future.
4. Tell the underwriter what happened
Once you decide on where you will buy insurance, end up on good terms with the underwriter.
Let the marketplace know who you chose and why.
Underwriters remember the companies that they quoted.
They remember what happened.
If they weren't treated well, they remember that too.
If you want to be able to reapproach the marketplace, it’s important that you haven’t burned your bridges.
5. Don’t go to the marketplace every year
And then lastly, don't go to the marketplace every year. When underwriters see your name every year, they lose interest.
I’ve had underwriters decline to quote accounts because they had seen applications for a customer 4 times in 5 years from 4 different brokers, then won none of them.
Go once every three to five years.
Give it some time to cool down.
Conclusion:
If you do all these things with a broker that controls enough of the marketplace, you're going to get a good deal.
Like I said, is there a company that may be able to offer something better?
Sure, always.
There's always some new product out that's willing to undercut the market by 30%. And then those products go away in a year or two years because they didn't charge enough money.
And then when you must find a new product because that company exited your marketplace, the next company will gouge you.
But, if you're working with a broker that knows your marketplace, is doing a good job approaching the marketplace and running that negotiation, you're going to get good, predictable, consistent outcomes that are below market average.
That’s the goal.
If you have questions about your insurance program or your procurement process and want to talk to me about it, here are some ways you can get in touch with me.
301-526-2046
Yorumlar