Here’s the scenario: your commercial insurance policy expires in 90 days. What does your strategy for the renewal look like? Many business owners take actions that effectively hamper their ability to get the best pricing in the insurance marketplace while thinking they are savvy consumers.
As a broker, it’s important to think like an underwriter when we go out to market for customers. It’s our job to explain the process in detail and prepare those that we work with to be in the best position possible come renewal time. We find that many business owners have never had this type of discussion with their broker, and it shows. What exactly do we mean by this?
Often, we receive declinations from underwriters due to what they call “underwriting fatigue.” This is also known as oversaturation. Brokers are blocking the market year after year with no actual intent to write a policy with the underwriter! This is the biggest frustration underwriters have because they feel as though they are being led on. This means they have quoted an account year-after-year and have never gotten a real chance to win the business. An underwriter’s time is very valuable; they have dozens of submissions sitting on their desk at any one time, and they must delegate their time to the opportunities that might best turn into closed business for their company.
Several factors can severely hamper the chances of getting a competitive quote, or any quote at all for that matter, from an underwriter.
Based on discussions with different underwriters, they shared with us what they see as the biggest barriers to success:
Asking the current broker to submit a request for quotes to the same markets as last year and every year prior
- Problem: If an underwriter sees the same submission every year after putting many hours of work into providing a quote and they never win the business, they will be much less inclined to try hard in the future. This is a perfect “boy who cried wolf” example.
- Solution: Create a 3-5 year plan with your broker detailing how often it makes sense to return to the marketplace. Your broker should also be in contact frequently with insights and industry updates into your market as well as the insurance industry as it pertains to how the quoting process may go. If an underwriter sees an account two years in a row, or if they know others who have seen it, the broker is bound for an automatic declination.
Allowing 3-5 brokers to go to all of their markets, every year
- Problem: First off, many people don’t understand that generally, only the first broker to submit applications can access a given insurance company. This can disrupt the other brokers, making the process more difficult and time-consuming. Also, if an underwriter sees multiple submissions for the same business come from different brokers, the underwriter may think they don’t have a serious shot at winning the business and will not be as competitive when/if they provide a quote. Underwriters want to know that the broker they are working with has the relationship with the client, whether it is new business or renewal. This ensures that the quote, if the most competitive, will be recommended by the broker. If every broker in the world has a shot at this, then their likelihood to work with such a customer is little to none. This is price shopping and not building a client relationship with someone. Price shoppers cause irrational and unhealthy pricing decisions in the marketplace.
- Solution: If you decide to shop your insurance program, you should choose a trusted and highly qualified broker that understands your industry to handle all of the quoting for you. This will present your business in a more favorable light with underwriters. Since the controlling broker is the one sending them the submission, they will feel more comfortable with the opportunity and with the potential for winning the account. If you feel the need to invite competition for the renewal, limit your choice to one other broker and make sure that you assign markets to each. This involves having each broker submit the markets they would like to approach and then dividing up their selections as you see fit to give both parties a fair shot.
Obscuring relevant information such as loss history and premium targets
- Problem: Withholding information, particularly the current premium, may seem like a smart move for negotiating purposes. Unfortunately, this common practice is counterintuitive. Underwriters need to put time and effort into a quote and frequently need to get approval from their supervisors to get the best pricing they have available. By hiding premiums, an underwriter that may have had the authority to give additional credits and be very competitive may then otherwise provide a quote that is out of line. They are then essentially shooting in the dark. Targets are the most essential piece of underwriting information aside from loss experience. The third most important is historical exposures which are used for trending loss performance based on growth, etc.
- A good broker/underwriter relationship can result in additional pricing considerations, but the underwriter must be comfortable with the risk of the new business, part of which includes having all relevant information available upfront. The same goes for loss history information. This information is used to determine the amount of credit given on a premium quote. The more transparent a business is about loss history, details of incidents, and corrective actions taken, the better. Incomplete submissions will get neglected. Clear communication with the underwriter about loss information is valuable. Let them know all relevant information early.
- Solution: Be transparent from the beginning. The more information that your broker has, the better chance you have in getting the best possible quote.
Asking if a carrier can reduce the premium further and then ultimately not going with them
- Problem: As stated earlier, underwriters have a long memory. If they pull strings and make a case with their supervisors to get additional pricing considerations, and then don’t win the business, they will be very unlikely to do the same in the future. “Fool me once…”
- Solution: Asking for additional credits is not a bad thing. Price is very important at the end of the day. If you make a request and it is granted, you should hold up your end of the bargain. Smart brokers make a convincing case for the client, and the underwriter will let them know if they can get to the required pricing level.
Delaying completion of applications and sending necessary files like a Business plan, financials or drivers and vehicle lists
- Problem: As a broker, our job is to tell your story to underwriters and make a case for why they should spend their time providing a competitive quote. In today’s marketplace, an underwriter doesn’t want to spend time on submissions that are missing information or that don’t have all the required documentation. Additionally, it is never advisable to wait until too close to the renewal date to finalize the decision-making process. Often, some adjustments need to be made, or other delays may present themselves that can cause problems with the smooth renewal of your policies.
- Solution: By providing the requested applications and other documents in an accurate and timely manner, a business owner will make it much easier for all parties to reach a productive conclusion. An ideal timeline is 90 days prior to the renewal date. While this isn’t always feasible, the more time you give a broker to market on your behalf, the better opportunity you have to find cost savings.
Material posted on this website is for informational purposes only and does not constitute a legal opinion or medical advice. Contact your legal representative or medical professional for information specific to your legal or medical needs.