Your Insurance Renewal

It is almost an automatic part of the insurance transaction for most community banks: the renewal.

Each year, your agent comes to you (usually just before your insurance expires) with the premiums for the next policy term. If your agent delivers a renewal premium that stays the same as you pay now, you’re happy. If the premium goes up 5%, well, that’s the way of life, isn’t it? If the premium goes up by 15%, your agent tells you that prices in insurance are going up, and there is nothing to be done. You realize you have little time, and the current coverages renew in a few weeks.

Is money being left on the table? Is your insurance company providing you with the best coverage at their best price? If your premium drops by 5%, how do you know that it shouldn’t have dropped by 15%?

There are complications. Some banks want to deal with a specific agent in town, usually a customer or board member. Perhaps you wish to use two agents or more. I have bank clients who own their insurance agent. I have bank clients whose agent is their brother. I was recently told of a bank where the CEO’s wife was the bank’s insurance agent.

It is tough to bid your insurance when your agent is family.

Here are some broad principles I have developed over my years of working with banks on the renewal of their insurance:

– 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.

– A match in personalities between the insurance agent and the insurance buyer is important.

– Trust between the agent and 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 the time of a 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 the insurance companies is important. Large premium volume with an insurer means that the agent has some pull with them — in both underwriting and claims.

– When using multiple insurance agents in a bid process, the buyer must assign insurers to agents. Insurers will not release quotes to multiple agents. You either assign insurance companies to specific participating agents, or chaos will ensue. The assignment of a company to a particular agent is important. An insurer’s performance for a particular insured does vary (in coverage, service, and price) depending on the agent who has brought in the business.

– Insurance underwriters have a 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 30%. They can also decrease premiums as much as 30% from the base. (Note to insurance people: Yes, I am over-simplifying the rating process. However, the fact remains that underwriters can largely do whatever they want with premiums.) Underwriting managers and supervisors have an even greater authority.

– Underwriters can almost always hit a stationary price target if they like your bank, respect the agent, and want your business. Tell the underwriter that he will lose the account unless he can meet or beat a competitor’s price, and he will beat the price. Give him 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 more sharp. Competition keeps service high, coverage broad, and pencils sharpened.

– Price is always an important consideration. It is rarely the only factor. This is as it should be.

– Underwriters have a great deal of latitude in coverages, too, though 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 banks prefer to renew their policies with the same agent and same insurer. In most instances, where the relationship of the agent with the bank is stable, a premium savings of 20% is needed for the account to move to another agent.

– Without someone pushing the underwriter, renewal premiums will be delivered to the agent a week before the policies expire. This is intentional by the insurance company. It is either intentionally done so that the insured has few options, or it is done because the insurance company is not tuned in to what their clients need. Either one is not the way partners treat each other.