Do You Have the Right Insurance Broker?

Selecting an insurance broker is one of the first and most important decisions a staffing company must make, yet one which doesn’t happen correctly many times.  How many of you deal with a family member, friend, someone local, a client or a broker who simply called on you and got the business because no one else could help or they were just the lowest cost?

What’s unbelievable to me is that for the majority of my 10 years of insuring staffing companies, the “local broker” is still my main competition.  It’s usually a “generalist” who doesn’t really understand nor have the expertise to properly handle the intricate and extensive needs of a staffing company but knows the owner, CEO, CFO or risk manager.  This is the broker that “googles” temporary staffing and insurance and starts from there.  That may be acceptable if you’re a typical manufacturer or distributor, but not a staffing company.

You should judge this process no differently than how you want your clients to evaluate you versus your competition.  Staffing companies have focused on value to combat the margin pressures they’re under.  The insurance industry works the same way.  We’ve got huge margin pressure (Average compensation commissions are only 5%!).   So, we know you need to sell your services on value, not price.  Are you prepared to do the same with your insurance relationships?

Let’s take a closer look at the broker selection process and the three options that are available to you.  They are:
1. Insurance Bidding
2. Pre-qualified Broker or Agent Bidding
3. Selecting a Broker through Pre-qualification

1. INSURANCE BIDDING:
 Bid specs or copies of policies are sent with or without premiums to all interested brokers
 Brokers to respond by designated date
 Proposals are reviewed based on “apples to apples” and selection based on the lowest price
 The Problems with the Insurance Bidding Process:
 Encourages response from unqualified brokers
 Lacks emphasis on client services
 Confuses insurance company underwriters
 Causes buying decisions to come down to price
 Lacks emphasis on a team approach – the team approach usually gets better results over time

2. PRE-QUALIFIED BROKER BIDDING:
 Allows all brokers and agents interested in bidding to respond to the request
 Brokers can complete a questionnaire about their capabilities and the carriers they would select
 Two to four brokers are then selected and market assigned
The Problems with the Pre-qualified Broker Bidding  Process:
 Doesn’t identify a broker’s service team
 Doesn’t require service levels to be spelled out
 Doesn’t identify or use many qualified insurers
 There’s no way to know if the broker’s team is compatible with your management and culture

3. SELECTING A BROKER THROUGH PRE-QUALIFICATION
 Choose one or a maximum of two brokers to approach the marketplace
 Start well in advance of renewal date and visit brokers’ offices to speak with staff who would be involved in your account
 Don’t focus strictly on communications skills.  The broker may be effective in dealing with you, but how do they communicate with the insurance carriers?
 Check references
 Don’t pick the best individual or firm, pick the best team.  Team members must know your industry and operations
Benefits to Selecting a Broker through the Pre-Qualification Process:
This process gives the best brokers an opportunity to establish or demonstrate:
 Professionalism
 Value-added service
 Compatibility with your management team
 Their niche or specialty areas of expertise that relate specifically to your needs
 Their position on fees and commissions
 Creativity and innovation in program development

WHAT YOU SHOULD DO TO GET THE BEST RESULTS:
1. Help the broker gain a thorough understanding of your risk management process and operations.  Let them review your policies and procedures, and insist they speak with your company’s management, including the owner
2. Maintain accurate records
3. Participate in the development of marketing strategies to the carriers
4. Establish realistic time frames
5. Communicate on what’s going right and wrong

So, invest your time and resources to make certain that your broker selection process gives you real value added and make your insurance program better than your competitiors.