The Best Way to Shop for Business Insurance: How to Avoid the “Crap Quote Game”
Business insurance can be a pain. It’s a cost that never goes away, it’s sometimes difficult to understand, it seems to always goes up in cost, you rarely use it, and when you do use it, it can be not so straight forward to get a claim paid.
Many business owners are familiar with utilizing an independent agent for their businesses’ insurance needs.
(If you’re not familiar with what an independent agent is, click here).
(If you want to know if your independent agent is good, click here).
However, it’s normal to get curious if your agent is really getting you the best deal.
Let me explain how it works.
An independent insurance agent is like a real estate agent. When you want to buy or sell your house, you likely hire a local, experienced, and trusted real estate agent to get you the best deal.
It wouldn’t make sense to hire multiple real estate agents. After all, they all work with the same housing inventory and Multiple Listing Service. It’s the same thing with independent insurance agents.
Most of them work with the same insurance carriers on the same online rating/quoting platforms.
Engaging two (or more) insurance agents at the same time with the same carriers is a bad idea. It results in what I call the “Crap Quote Game”. Where your business is stuck wasting time making comparisons, filling out a ton of paperwork, and not even getting the best deals.
You see, it’s a first come first served system. The agent that comes in second with your businesses’ risk data is locked out of that carrier platform. This approach leads to wasted time, annoyed underwriters, additional paper work like “BORs”, and a genuinely bad insurance buying experience.
Insurance carrier underwriters keep notes. They know which businesses risks are submitted with which agent every single year. If they see the same business with different agents every single year, they become aware of the disloyalty and automatically disqualify you from the best rates. Underwriters are humans (even though they can seem like robots). They get dozens, if not hundreds of e-mails per day. They get tired and drink a ton of coffee just like you and me. They also cherry pick the best deals, because it takes MUCH more time to write an account as new business than it does to renew an existing account from the previous year.
So what strategies can you use to create competition among insurance carriers, keep your agent honest, and truly get the best deals for your business?
I recommend choosing one of the following about 120 days before your insurance policies renew:
Option 1: “Market My Account”
Where you ask your current agent to “market your account”. This will hopefully get your current agent to shop the insurance marketplace to all intrested carriers and help gain clarity if your current program is priced competitively. Make sure to ask for a “marketing summary” to see a list of which carriers declined, which quoted at which price, and why your current agent is recommending your carrier. Asking for a marketing summary is like when your teacher used to ask you for your homework.
· Note: If you think your agent would potentially fake their marketing summary (homework), or if they get you this data less than one week from your renewal, this option is a bad one.
· Option 2 or 3 should be considered. The “giving your client an increased renewal price a few days before renewal” is the oldest insurance agent trick in the book and that bullshit shouldn’t be put up with. It locks you into an increased rate, shows your agent is reactive and leaves you holding the bag because another agent likely won’t have enough time to help you. It’s irresponsible and can feel like you’ve been scammed. Going back to the school analogy…This is like waiting until the deadline for a big term paper just to ask your teacher for an extension when you had the syllabus months in advance. End rant.
· Note: This option should not be done every single year given the “crap quote” explanation above. Every few years is reasonable.
Option 2: “Broker/Agent Selection Process”
Where you have a meeting or two with a handful of brokers, (more than 5 would likely be overkill) to learn about their capabilities, how they can reduce your company's risk, and see if there may be a culture fit. After these meetings a “BOR” would be signed, essentially firing your current agent and formally saying to the insurance carrier marketplace “this is my new agent”, “I want to exclusively do business with them on the upcoming renewal policies”:
· Note if it’s not going well, you can sign a BOR letter to another agent whenever you want.
· Note this is the most time consuming option, and is often a strategy large corporations with formal board of directors take.
Option 3: “Carrier Selection Process”
Where you bring in one additional agent to go up against your current agent, specifically with two groups of different carriers that they are planning to go to market with.
Agent A goes to Carrier 1, 2, 3,
Agent B goes to Carrier 4, 5 , 6.
This strategy kind of blends option 1 and 2.
Note: it would be your job (insurance buyer) to communicate with both agents about which carriers they are going to market with and have them agree on not overlapping (again this sticking point is to avoid crap quotes as described above).