In today’s challenging economy, businesses need every competitive advantage possible not only to thrive, but also to survive.
That’s why partnering with the right insurance brokerage firm can and will make a difference. The age of choosing an insurance agent or broker because he or she is your relative or friend, or because he or she invites you to a big lunch every month, are gone.
“The right choice of insurance brokerage firm will result in major cost savings and important balance sheet protection,” says David Crooks, chief operating officer of Aon Risk Services, Inc. “The wrong choice can lead to over-payments on your current insurance spend and, even worse, major gaps in insurance coverage, which may lead to significant financial losses.”
Smart Business spoke with Crooks about insurance and how to find the broker that’s right for you and your business.
How should you decide what type of insurance broker is right for your individual needs?
First, let me note that competing insurance brokerage firms in what is a limited insurer marketplace generally do not produce results. Market competitions generally lead to several insurer declinations, resulting in fewer options for the client, not more. The key to selecting a broker is to craft a plan that includes a program audit process, an interview process and/or a request for proposal.
A program audit or review process could involve one particular program (property, casualty, management liability or benefits), or it could include all of them. This will require a significant investment in time and may include an up-front fee by a third-party insurance broker. Commitments may need to be made to move the program to the third-party broker, dependent upon what is uncovered in the audit process. Make sure the scope of the review is fully understood, including deliverables. The broker should have clients of similar size and industry class, as well as a robust benchmarking capability internal to the firm in order to provide a credible review.
The interview process is generally a less formal process involving a request to meet with the management and proposed account service team of an insurance broker(s). This by nature would be based more on the capabilities of the insurance brokerage firm.
A request for proposal is a formalized process where a set of questions is developed and a formal written response is crafted. This may include elements of an audit and/or interview process. You need to refine the process to only the insurance brokerage firms that have the capabilities to represent a company in your industry.
If you are pursuing this process because of service concerns or turnover involving your current insurance broker, that broker should not be included in the process. The decision to leave the incumbent should be made up front if there are service issues. Limit the field based upon what you know now. You are not doing the local or regional agency any favors by including it in your process if it has little or no real opportunity to win your business.