The Insurance Renewal Decision – Your Options

There are four possible paths in the renewal of your insurance policies:

– Renew your current policies with your current agent using your current insurer.

– Use your current agent to get quotes from multiple insurers.

– Agent selection. Interview several agents and pick the best.

– Review multiple agents. Pick several. Let them bid using multiple insurers.

Each approach has advantages and disadvantages:

Renew With Your Current Agent, Using Your Current Insurer

Advantages to You Disadvantages to You
Easy on you, the insurance buyer, as your agent has all the information he needs. Shows loyalty to your agent and insurer. No competitive pressures to push your agent or insurer to provide a better price and coverage. Coverage errors may exist. Nobody checks your agent’s work. You may miss opportunities from viable insurers – better premium/better coverage.You’re stuck with the premium and coverage your insurer throws at you.

Your Current Agent Obtains Quotes From Multiple Insurers

Advantages to You Disadvantages to You
Easy on you, as your agent already has the information he needs. Competition pushes insurers to offer better pricing and better coverage. Shows loyalty to your agent. No competitive pressures to push the agent to provide a better price and coverage. He knows he has your business. Coverage errors made in the past may persist, as nobody is checking your current agent’s work. You may miss quotes from viable insurers that your agent does not have access to or know about.Your relationship with your current insurer may suffer.

Agent Selection Process – You Interview Multiple Agents and Select the Best

Advantages to You Disadvantages to You
You’re exposed to multiple agents and their ideas, yielding alternatives. Selected agent may be more aggressive to impress you, the new client. Competition pushes insurers to offer better pricing and better coverage. Competition among insurers, but the agent is not pushed to perform. The process can involve a great deal of your time and effort as you gather information and educate the agents and insurers. You may miss quotes from viable insurers, as only one agent is marketing for you.Your relationship with your “old” agent may suffer if he is not selected.

Review Multiple Agents. Pick Several. Let Them Bid Using Multiple Insurers

Advantages to You Disadvantages to You
Ultimate competitive pressures are exerted, as all participants must perform in order to win. Competition means the knives are out and the pencils are sharp. A wider range of competition can result in lowest prices and broadest coverages. You are exposed to multiple agents, their approaches, insurers, and ideas. The process can involve a great deal of your time and effort. Comparing and evaluating the resulting bids may be difficult without help. Your relationship with your “old” agent may suffer if he is not selected.Your relationship with your “old” insurer may suffer if that insurer is not selected.

You may have to start new relationships with agents and insurers.

The Decision Process

Path One: You Can’t Change Agents?

It is my experience that well over half of community banks cannot, for a variety of reasons, change insurance agents. Some banks have a subsidiary that sells insurance (tough not to buy your insurance from your own company). Some bank’s insurance agent is a large depositor, stockholder, or board member.

Having close ties to your insurance agent can be a good thing. I’ve said earlier that the most important part of the insurance transaction is the agent’s relationship with the insurance buyer. Close, almost family relationships can mean that your agent is in there swinging for you. There is, however, the danger that complacency can set in. Prevent that by setting high expectations for your agent.

If, by necessity or by decision, you are staying with your current insurance agent, start the renewal process early. Meet with your agent one hundred twenty days before your coverage expires. Push for a premium indication from your current insurance company ninety days before your current insurance expires. You’ll get push-back on this. Many insurers don’t want to play this way. Frankly, getting you the renewal quotes a week before expiration is to your insurer’s advantage.

Tell your insurer that you want to settle the issue of the renewal early so that you can make proactive decisions on your insurance. Agree that if the renewal terms are fair, you will not bid your coverage to other insurance companies. You cannot, however, wait until the last minute to get information.

At the same time, discuss other insurers with your agent. Have a plan in place so that if your current insurer does not perform (either their renewal offer is unacceptable or they are unwilling to provide an early indication of premium) you are ready to work with your agent to find other insurers to protect you.

Negotiate Your Renewal, Whatever Path You Take

There are several common parts to whatever path you take. The most important thing is to always negotiate with insurers before you bind coverage. Premium setting is an art, not a science. Insurers have guidelines for pricing and coverage offerings. There is always room for negotiation.

Underwriters can debit your premiums by 25% in most cases. They can also credit your premiums by 25%. Right there is a 50% swing in premium that is at the discretion of the underwriter. Every insurance company has multiple subsidiary insurers. Those subsidiary companies have different rating structures and plans. Think of Subsidiary Insurer A as being the preferred insurer (with lower rates), and Subsidiary Insurer B as being the standard rated insurer.

Between standard and preferred, debits and credits, insurers have the ability to charge one bank $50K (average rates), an identical bank $31,875 (preferred rates), and a third bank $71,875 (sub-standard rates) — all for the same coverage.

Said another way, the same insurer can choose to charge you $31,875, $50K, or $71,875 for your insurance. Underwriter’s choice, insurer preference, your desirability, and (perhaps most importantly) what the insurer thinks it needs to do to keep or get your business.

Premium Options For Your Insurer – How Much Can They Charge?

Insurers have wide latitude in the premiums they charge.

Standard Rates

-Base Manual Rates: $50K

-Insurer Rating Program Factor: 1.00

-Schedule Credits: 1.00

-Final Premium: $50K

Sub-Standard Rates

-Base Manual Rates: $50K

-Insurer Rating Program Factor: 1.15

-Schedule Credits: 1.25

-Final Premium: $71,875

Preferred Rates

-Base Manual Rates: $50K

-Insurer Rating Program Factor: 0.85

-Schedule Credits: 0.75

-Final Premium: $31,875

Negotiate your premiums. Negotiate the coverage. Ask for coverage enhancements while keeping the premium the same.

Negotiation before coverage is bound is the most underused tool in insurance buying.

Path Two: You Can Consider Other Agents, But Do You Want/Need To?

Your insurance agent should be an important part of your risk management team. Here is the real test:

Imagine you’re standing in front of the smoldering hulk that was once your main office. The fire was fast and devastating. Is your insurance agent the person you want standing next to you?

If your answer is anything but an immediate and resounding “Yes!” then it’s time to think about finding a new insurance agent (or a great bank insurance consultant).

Have You Bid Your Insurance Recently?

Competition among agents and insurers is the key to getting the best price, coverage, and service. Nothing pushes us to perform better than the nudge of competitive pressures.

Competition means that nobody is sure who will win, and everyone could lose.

Having your insurance agent get multiple quotes from many insurers injects some competition into the process. However, having two agents fighting it out means that the gloves are off, and everyone is in there scrapping for your business.

One agent with multiple insurers is not pushed to get everything from the insurers; the agent may get what he or she can but is not pushed to get everything.

One agent quoting multiple insurers can get away with accepting the quotes he or she is given and presenting them to you.

When there are multiple insurance agents competing for your business, multiple phone calls are made. Supervisors are called in. Everyone scrambles because they have no idea what the other agent is presenting, and nobody wants to lose.

When multiple agents are involved in your account, vying for your business, insurers are called at the last minute and asked for a bit more credit and a bit more coverage.

However, you are not well-served by bidding your insurance every year. The process is exhausting for agents, and it involves the resources of your bank. Agents that compete and do not win will resent the work they put in to no reward. The insurance company underwriters will also feel left out. Bidding every three to five years is an effective course. It gives you a chance to see the work your agent does for you. You get to build a relationship with an agent and insurer.

Renewing When You Don’t Bid

So you’re in between bids, meaning that you bid your coverage within the last few years. Follow the process I described above in the discussion of what to do when you can’t change agents:

  • Start the renewal process early.
  • Insist on getting premium and coverage indications from your agent and insurer ninety days before your program expiration date.
  • Talk with your agent about other insurers.
  • Negotiate, negotiate, negotiate.

Agent Selection Process

The agent selection process is an important part of changing agents or going to bid. In either case, you want to choose from a pool of the best agents.

If you are changing agents, your goal is a pool of agents from which you will pick one to bring you proposals from the insurers he or she thinks are best for your risk exposures and appetites.

If you are bidding your insurance, your goal is a pool of agents from which you will select a few who will bring you proposals from selected insurers.