All organizations know that insurance is a necessity to have. However, many businesses fail to recognize the intricate details that insurance involves. For instance, the reservation of rights notification can alert the insurer to investigate and defend particular claims with the potential to deny coverage. Insurance buyers may not realize their incumbent broker or agent has created exclusive rights to not only their incumbent insurers but all insurance companies the broker’s agency contracts to write business through.
The Right of the Incumbent
A broker who participates in a Request for Proposal process cannot access a quote from insurers who have provided quotes to the incumbent broker. The incumbent broker is the Broker of Record and they may block competing brokers from obtaining quotes with insurance companies they contract to write business. This reserving of insurance companies is on a first come basis and can prevent an alternate broker from obtaining quotes. As a result, competition is eliminated. During this period, there is no way of knowing if another broker may have better negotiation skills.
Organizations must realize the importance of working with the right broker for property insurance coverage and protection, negotiation of claims and issuance of certificates of insurance. Sometimes, in the insurance world, you might be with the right insurance carrier, but the wrong broker. A Broker of Record letter might just be the right answer for your company to enter a partnership with a broker that is better suited to work with your company in a meaningful and productive way.
Start Your Process Early
All organizations should know January 1st and December 31st are the busiest insurance renewal dates for underwriters. Brokers may recommend an alternative date to allow for better negotiation of renewal terms. If your renewal is on September 30th this is the best time to consider working with Expense Reduction Analysts to review your insurance program. As a best practice, companies should start reviewing renewal specifics at least one quarter before their renewal date.
Understand Your Broker Service Level Agreements
Many organizations and their leaders are unaware of the exact terms of their Broker Service Level agreement. For instance, it is always a great rule of thumb to investigate if an insurance company is overcharging their fees. A seasoned expert not only helps navigate through the competition for your organization but also encourages transparency from the broker. Brokers should be asked to outline their credentials, industry specialization, consulting expertise, insurance company relationships, and specific services offered.
Ensure your organization keeps insurance reservation specifics top of mind. An expert in your corner will help advocate for beneficial and ethical services for your business. Long term insurance relationships are optimal, but only when they are properly outlined and understood.
About the Author:
Marlys Schmitt is an experienced Principal Consultant from Expense Reduction Analysts (ERA) in Minnesota. As an advisor and advocate, her focus is to build strong relationships and deliver comprehensive cost containment solutions for her CEO and CFO clients. During her tenure with Expense Reduction Analysts, Ms. Schmitt has led reviews of over $20 million in expenses and completed over 100 client projects.
Marlys has an average cost savings of 18.5%. In 2012, ERA elected Schmitt as the Insurance Practice Chair comprised of eight consultants throughout the United States, who focus on insurance and risk management project reviews. Her particular expertise in Insurance and Risk Management includes her ability to analyze coverages, perform and consult on risk management services, advise on claim expertise, and manage broker relationships. Marlys is an expert at obtaining the broadest coverages at the most comprehensive premiums for her clients. Marlys is asked by many of her clients to assist in driver safety programs, abuse prevention and investigation, OSHA safety, corporate safety plan development, coverage reviews and benchmark studies.