Sometime in the next year, all your business insurance policies come up for renewal. You're faced with questions and decisions. Business owners tell me they are never sure what to do.
I call it the Annual Insurance Affliction.
There are four ways you can handle the expiration of your insurance policies:
1. Renew the current policy with your current insurer using your current agent.
2. Use your current agent to get quotes from multiple insurers.
3. Use multiple agents to get quotes from multiple insurers.
4. Review multiple agents, pick one, let that agent access multiple insurers.
Renewing your current policy with the current agent and insurer (#1 above) is the easiest. At most, you'll meet with your agent to update his information. He sends you the renewal policy and a bill. All done.
The second option above puts your current agent to work getting a renewal quote from your current insurer and from other carriers. Can she find you better coverage at a better price from another insurer?
Option three puts several agents in competition with each other.
The last approach focuses on the agent. This is often called an agent selection process. Multiple agents are interviewed looking at experience, access to markets, service offerings, and personality. From the process, a single, "best," agent is selected.
1. Current Agent / Current Insurer
If you are going to rely on your current agent and renew with the current insurance company, put one condition on your agent. Insist that you receive your renewal premium quote 60 days before the expiration. In this way, you at least get some time to change your mind and get competitive quotes if presented with an unappealing renewal offer.
Your insurer and agent may push back on this strategy. However, allowing your insurer to provide renewal quotes in the eleventh hour leaves you in a vulnerable position. Many insurers, almost as a matter of procedure, will deliver renewal quotes less than a week prior to renewal.
2. Current Agent / Multiple Insurers
This approach injects some competition into the process. Your agent will approach other insurers in her office, getting proposals to compare with your current insurer's offer. While I use this approach often, I'm mindful of the fact that the agent is not worried about losing the business. There is also a strong tradition in the business for allowing the current insurer a "last look." That may be good for the agent's relationship with insurers. However, is it really better for you, the client?
The recent insurance marketplace proves that any insurance company can hit any competitor's price, when they want to. Insurers will be just as competitive as they have to be. Why would they leave any money (or extra coverage) on the table? As an insurance buyer, you must gauge how aggressive you want your coverage and pricing. Build a process that makes that desire manifest in the self interest of the participating players.
3. Multiple Agents / Multiple Insurers (AKA Bidding)
Frankly, this approach can be tricky. It also consistently results in the best price, best coverage, and best service offer the marketplace has to offer.
To generate true competition, all bidders must be in a position where they can lose. That's the trouble with the "current agent / multiple insurer" approach. Your agent knows she keeps your business.
With multiple agents participating, each agent can lose.
Step one is to decide on the players. I find that two agents shooting-it-out is usually best. At times I work with three. Rarely more than that. I often start with six agents and cull them down to one or two besides the current agent, using questionnaires and interviews. Rarely is the current agent excluded.
Your agents probably have access to many insurance companies. If one agent accesses Podunk Mutual Insurance Company, no other agents will be able to get quotes there. Most insurance companies follow this rule. (I've railed against this practice for 25 years. It's anticompetitive and promotes lazy insurance agents.) You will have to assign insurance companies to specific agents in your bid process to control the chaos that comes from several agents approaching the same insurance company. Rarely do I assign the current insurer to any agent other than the incumbent.
After selecting agents and assigning insurers, provide each participant with a packet of information about your operations and insurance. You review the resulting bids and pick the right one.
The rub is trying to select the best agent and best insurance program. Frankly, most bid situations result in the current agent keeping the business. Most insurance buyers just find that it’s easier in the end. Trying to figure out which agent offers the best program at the best price can often be just too daunting. The results, however, can often be worth the effort. One tool that often helps with the comparison is a spreadsheet where each column is an agent’s proposed program. List the coverages as rows and fill in each cell with the limits, deductible, or coverage enhancement. A spreadsheet allows you to see the good, the bad, and the missing from each agent’s program.
4. Agent Selection Process
This approach has you interviewing several agents in addition to your current agent. Review experience, access to insurance companies, personalities, service abilities, support staff, and approach. Judge each and select one.
I use questionnaires, interviews, references, office tours, and past experience to help my clients select the one best insurance agent.
That single agent then has complete access to the insurance marketplace to obtain proposals.
This approach can help you judge your agent compared to other agents. You may find that valuable services are not being offered to you. You may find that your agent is earning his commissions.
Sometimes, having a new agent injects a fresh set of eyes into your risk management plan. It also means that you will be spending time educating a new agent on your operation.
Scott Simmonds, CPCU, ARM, CMC, has provided insurance advice and counsel to hundreds of companies, large and small, throughout the U.S., and his insurance work has involved companies in a wide range of industries. Scott's writing and comments have appeared in the Wall Street Journal, Forbes, Fortune, Money, Inc. Magazine, the New York Times, Investors Business Daily, Kiplinger's, and the Los Angeles Times, among other publications. His Web site is www.scottsimmonds.com; his blog ishttp://scottsimmondsinsurance.blogspot.com.