Here are broad ideas I have when looking at the renewal process from the insurance buyer's perspective:
- The most important part of the insurance transaction is the relationship the insurance buyer has with the insurance agent. That being said, few agents have unique skills and resources. Almost any insurance buyer can easily find an agent who will provide superior service. In fact, a search will usually uncover several.
- Insurance agents all tout the exceptional service they provide. The reality is often different. Insurance buyers expect great service and dismiss service claims of potential agents.
- A match in personalities of the insurance agent and the insurance buyer is important.
- Trust of the agent by the insurance buyer is important.
- The geographic location of an agent is important. Different states have different laws. Regional insurance markets are different. Understanding the insurer's resources in an area can help at time of claim.
- An agent's specific industry expertise can trump the importance of an agent's location.
- An insurance agent's access to a broad range of insurance companies is important.
- An insurance agent's relationship with their insurance companies is important. Large premium volume with an insurer means that the agent has some pull with the insurer - in underwriting and in claims.
- When using multiple insurance agents in a bid process, the buyer must assign insurers to agents. The assignment of a company to a particular agent is important. An insurer's performance does vary (coverage, service, and price) by the agent who has brought in the business.
- Insurance underwriters have wide latitude in the premiums they can charge and the coverage they can offer. Underwriters are charged with finding the right price based on the perception of the risk and the appetite of the insurance company. Most insurance rating starts with some kind of base premium. Underwriters can then increase premiums by as much as thirty percent. They can also decrease premiums as much as thirty percent from the base. (Note to insurance people: Yes, I am overly simplifying the rating process. However, the fact remains that underwriters can largely do whatever they want with premiums.) The authority of managers and supervisors is even greater.
- Underwriters can almost always hit a stationary price target if they like the risk, respect the agent, and want the business. Tell the underwriter they will lose the account unless they meet or beat a competitor's price, and the price will be beat. Give them a last shot, and that shot will almost always hit the target.
- The threat of losing a bid or an account makes agents and insurers sharper. Competition keeps service high, coverage broad, and pencils sharp.
- Price is always important to the insurance buyer. It is rarely the only consideration.
- Underwriters have a great deal of latitude in coverages, too. Not as broad as with pricing. However, when pushed for a reasonable coverage concession, most underwriters can get the job done - if they really want to.
- Most insurance buyers prefer to renew their policies with the same agent and same insurer. In most instances, where the relationship of the agent with the client is stable, a premium savings of 20% is needed for the account to move. Even then the current agent often gets the "last shot."
Comments encouraged.
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Scott lives in Maine and runs a successful consulting firm. He has worked with over 1,500 businesses in his 30 year career.
