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There is a commonly held misconception that multiple insurance brokers can secure property and casualty insurance from the same insurance company. While this may be common practice in the life and health world of insurance, not so with property and casualty.
Property and casualty insurance companies will only recognize the insurance broker who first provides it the submission; the door for any subsequent broker submissions is summarily closed. It follows then that the fastest and first to enter the marketplace has the best shot at writing the business by blocking markets and restricting competitors. This is particularly true if the first out of the box is the incumbent broker who floods the marketplace with submissions. Right about now this is sounding more like the 1889 Oklahoma Land Rush.
There is a way to establish some sanity in this process so you get the best results from the competitive process. First off, more is not always better. If you allow too many brokers to compete the "marketplace pie" will be cut up into smaller pieces, thereby limiting the negotiating abilities of each broker. This is because there may be only a limited number of insurers who are truly interested in that class or type of business. The insured is best served by limiting the number of brokers to no more than three which will give each a reasonable selection of companies to choose from.
The next step is very important to avoid a marketplace “land rush”. Ask the chosen 2 or 3 brokers to submit a single list of desired markets they would like to approach by line of coverage and in order of preference listing their most preferred market first. You then assign in order of preference, resolving conflicts by who has the same insurer higher on their list. For instance, if Broker A has a very strong relationship with Travelers Insurance Co. and believes they will provide the best quote for your type of business.....it better be on the top or his or her list. The competing brokers will have no room to complain if they did not give Travelers the same relative importance. This process capitalizes on the strongest broker/company relationships and maintains that only one broker is approaching a given insurer.
It is important that this process start 90 days prior to the expiration of the insurance coverages being competed for. You should make certain that each broker is working with the same exposure information, such as property values, payroll, sales and list of automobile units (to name a few). You next require that all proposals be submitted no later than 2 weeks prior to expiration. This gives you adequate time to evaluate the quotes and request modifications where needed. Oftentimes, a broker will respond that the underwriters will not furnish the quote by your deadline of 2 weeks before expiration. In these cases you can tell the broker his quote will not be considered, which provides a strong incentive to meet the deadline. You can always consider quotes after the due date if it is to your advantage.
While the handling of insurance is no picnic for any business today, instituting the above process will make it less painful and will most certainly improve the results of any bid process.
