I know what you're thinking: "Wait - what? Aren't you an insurance broker? How do you get business? Are you an idiot?"
Yes.
Here's the thing - quoting with multiple brokers actually hurts your premium.
Here's why:
Most carriers only allow one broker to submit a quote before that market is ‘blocked.’ With a few rare exceptions, there aren’t really exclusive carriers that only certain brokers have access to.
Blocking the market can, of course, upset your current broker, but it can also upset underwriters. If an underwriter gets a new submission, the first question they ask is often “do you control the account?” This is because they have limited time, are saturated with submissions, and want to prioritize the ones that have the highest probability of closing.
Now imagine that an underwriter receives identical submissions from four different agents in one week. Is your clean loss history and safety standards doing you any favors if underwriters feel they have no shot at writing your business?
Your reputation in the marketplace and ability to foster competition isn't the only thing at stake. For instance, quoting with multiple brokers often means that you are going to be presented with only the most competitive premium options. Each broker wants to be the 'lowest bid,' so none of them are incentivized to present you with options that seem less competitive - even if these other options are more appropriate for your business. The 'lowest bid' quote usually has some kind of critical exclusion or gap in coverage that leaves you high and dry in a common claim scenario. That is how the carrier can afford to offer substantially below-market rates.
The only thing worse than paying for insurance is paying for insurance that doesn't cover you.
So, if you suspect you are overpaying for insurance, what do you do?
The best way to buy insurance is relatively simple. Here are the basic steps:
- Interview several different brokers that specialize in your industry (ask them for references in your class of business)
- Confirm they have broad market access with carriers that are competitive (consider asking for benchmarked data on rates, or a sample market summary)
- Ask about their marketing/renewal negotiation process (do they block the market every year, how do they ‘sell’ your risk to underwriting, etc.)
- Hire the best one. You should do this with a ‘broker of record’ letter - this allows you to appoint your representative to the insurance market and equips them to negotiate most effectively on your behalf
This approach allows you to have control over your process - you know who is quoting your insurance, you know you can rely on them to find you proper coverage, and, if you ever feel the need to ‘keep your agent honest,’ you have a system in place to do so without subjecting yourself to the torture that is quoting with multiple brokers (who will generally say anything to get the sale).
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