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| Making sure the insurance broker is well qualified and
that he or she understands your business will help you
weed out the wrong candidates. |
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The ultimate goal of the interview process is to pick the broker who can spur competition from insurance markets. This process is similar to picking your CPA or banker. The objective is to develop a business relationship you will have for many years. By committing to one broker, you are giving notice to the insurance companies that your broker has a mandate to get you the best program available. This allows your broker, rather than the insurance company, to drive the process and control the pricing.
However, it’s good to note that the single broker relationship has the potential to be slightly more expensive and also may limit your exposure to new ideas.
Since most brokers say they have access to the same markets, this process is more about picking the broker that offers the services you need for the right price. This concept can be difficult for many contractors to accept because they are bidding on projects every day and feel their broker should do the same. Your partner broker does get competitive bids on your behalf. Your broker will be able to provide you with an analysis of all critical items such as price, coverage and service, so you can make the best decision for your company.
Some businesses prefer to have insurance brokers compete and allocate insurance market between brokers, who then represent them to the marketplace. This approach can generate new, innovative and creative solutions and also potential savings on ancillary lines of coverage such as property insurance, equipment coverage, professional liability and employment practices liability insurance. While not usually the drivers of a contractor’s insurance program, saving a couple thousand dollars across numerous lines of insurance could add up quickly.
This so-called “market allocation process,” however, is not without significant disadvantages. The insurance market is limited for contractors, so having more than two brokers competing can work against you. It’s also time when two brokers are involved consuming gathering information, answering questions, analyzing proposals and making a program decision. This process could be tedious and take so much time that it may not be the most efficient way to make your buying decision. Moreover, not choosing one broker could muddy the waters for the insurance companies. If you do not allocate your markets clearly, and carriers are being approached by two different brokers, an insurance company could decline to quote based on conflicting underwriting data.
While in the spirit of competition, the brokers, insurance companies and you may lose sight of what is really important: Choosing the right broker (is the broker qualified?), selecting the right insurance company (not the cheapest price) and ensuring that your risk management program covers your operations (does this program reflect a true understanding of your company?) should always remain the common goal for all parties involved.
You must focus on the goals you want to achieve and not confuse the lowest price with the best overall program. If you are getting high-quality service from your broker (claims administration, loss control, risk transfer training, etc.), your program and experience will result in the lowest price in the marketplace.
Changing or bidding an insurance broker often is not the way to obtain the best results.
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