Multiple Agents Bidding Multiple Insurers

So you have decided that you do not want to pick a single agent.

In this process you will end up getting proposals from the star agents, picking the best, and allowing that agent to place insurance in force with the insurer he or she proposed.

Here’s a detailed picture of the bid process.

Bid Process, Step One: Insurer Assignment

Now that you have your agents selected, you must assign insurance companies to each agent.

In property and casualty insurance, insurers limit agent access. If Agent A contacts Podunk Insurance Company, no other insurance agent will be able to get a quote from Podunk. Many call this process market blocking — only one agent has access to an insurer. Other agents are blocked unless they move the “authority” to another agent by getting a broker of record letter signed by the insurance buyer. The broker of record letter moves the authority and access from the first agent to the agent in possession of the letter. The first agent loses access.

Confused? It’s understandable! It’s a confusing process. I think the whole thing is anticompetitive and wrong. I’ve been fighting it for twenty-five years. It is a tradition that protects sloppy agents at the expense of quality. However, it is the system we have to work with in most states.

Market Blocking Is Anticompetitive

For more than twenty-five years, I have been fighting the idea that an insurer will only provide a quote to a single agent for a business. Here is a letter I wrote several years ago, published by The Standard, an insurance industry publication:

To the Editor,

The insurance business needs to lose a vestige of the insurance marketplace of the last century. Let’s become friendlier to competition and the free market.

For my thirty years in the insurance business, I have seen insurance companies engage in a market practice that is anticompetitive, restrictive to the free insurance market, and just plain wrong.

From the insurance buyer’s perspective, the practice is called “market blocking.” It is the tradition that an insurer will only provide a proposal to a single agent — blocking all other agents from accessing that market for that insurance buyer.

For as long as anyone I know can remember, property and casualty insurance companies have only provided proposals of insurance to a single agent for a particular insurance buyer.

If Brown Company wants a quote from Insurance Agent A and Insurance Agent B, Peerless Insurance will only provide a quote to the first agent with applications. The same is true of Hanover, Acadia, MEMIC, OneBeacon, Hartford, Travelers, Chubb, AIG, Philadelphia Insurance, Maine Mutual, and every other insurer I can think of.

Agent A and Agent B will not be able to deliver a business insurance proposal from the same insurer. For many agents and insurance buyers, this means that there is little real choice, as different insurers have different appetites. Most agents have been in the situation where they are unable to quote an account because other agents have reserved the insurers who have an interest in the account.

In some cases, agents game the system by firing off applications to insurers for no other reason than to keep other agents from participating in a bid.

This practice of blocking limits competition and therefore has a negative impact on the marketplace. Restricting the ability of agents to compete for business leads to higher prices for insurance buyers.

This is clearly anticompetitive and allows certain insurance agents and brokers to control the marketplace without value to the insurance buyer. It is certainly true that the insurance buyer can assign the insurer to another agent. Two agents can’t quote the same insurer though.

Imagine the price of any product without competition. Let’s open up the marketplace.

I am not advocating regulation. I abhor government intervention in the marketplace, and am a consistent and vocal opponent of rules and laws imposed on any industry. In my experience, regulation is usually couched in terms of protecting consumers, when in reality the protection provided is for the industry itself or for protecting regulator jobs. Regulations almost always restrict competition in some way, and that is against the interests of consumers. Further, government intervention always limits freedoms.

I am asking that insurance companies end the anachronistic practice of market blocking and allow multiple agents to present quotes for a single insurance buyer. Allow the insurance buyer to see the quality and professionalism of the agent through open competition.

Not only is open competition good for the insurance buyer, it is also healthy for the high quality agent. Fewer restrictions on competition means that more buyers will see the professionalism of the agents they work with.

Insurance companies also benefit. More competition means more good business will come to insurers who will have a better chance of winning exceptional accounts.

Further, I call for an end to state anti-rebating laws. Allow individual insurance producers to determine the terms of the sale of a policy. If the agent wants to provide a lower premium to an insured by cutting commissions, why not? Does a restaurant set a meal price? Can a lawyer not set her own fees? Let an insurance agent do the same!

I’m sure that many can come up with reasons to retain these market restrictive practices. None of them, I dare say, have anything to do with what is in the best interest of the insurance buyer.

Allow insurance buyers to judge the quality of the agent and the coverage offered. Allow agents to compete freely. Remove restrictions on competition between agents. Allow quality and not protectionism to rule the insurance market.

From the “Agent Selection Questionnaire” you received in the process of selecting participating agents, each agent requested access to specific insurers for bank specialty insurance, standard property and casualty lines, and workers’ compensation.

Use that information to complete a matrix of requests — one for each of the three lines of coverage (bank specialty, standard property and casualty, and workers’ compensation).


Current Agent

Agent A

Agent B

First choice
Second choice
Third choice
Fourth choice

Your current agent will probably ask for the current insurance company. That is almost always granted and becomes his or her first choice.

Are there overlaps with the other agents and your current agent? This may be your chance to further narrow down your choice of agents.

Whenever possible, I recommend that you bid with only two agents — your current agent and the strongest competitor. Having three agents may force you to split up the markets too thinly.

By the way, the market selection process is the single toughest part of the bid process. Assign markets improperly and you may end up hurting the outcome of the bids. At times, you may have to discuss the issues with the participating agents. If one insurance company is the top choice of each agent, consider calling the agents separately and having them make the case for that insurer to supplement their comments in the Agent Selection Questionnaire.

Frankly, in a three-agent bid situation, someone always ends up being ticked off at the assignments. It is possible that one agent will pull out at this point if that person feels incapable of getting a fair shot at the business with the markets assigned to him or her. I never hold such a move against an agent, whose time is valuable, too.

Step Two: Provide Agents With Underwriting Information

You’re going to have to put together information on your current insurance program along with claims information and underwriting information. Ask your current agent to help with this process. Most will help you. It may be a touchy subject. Some agents don’t want to help the competition. Take the stance that this is part of an agent’s job. Failure to cooperate here will be viewed negatively at decision time.

It is possible for each participating agent to build his or her own information. This will mean a great deal more time for you. Push your agent to cooperate.

Underwriting information should include:

– A schedule of all vehicles, mobile equipment, buildings, and other property to be insured. No value is necessary for vehicles. Mobile equipment should show market values (actual cash value). Buildings and personal property should show replacement cost values.

– Five years of insurer loss runs (your current agent can provide these to you).

– Workers’ compensation experience modification worksheets for the upcoming year and the current policy period.

– General liability premium basis (e.g., payroll, sales, square footage) based upon the current policy (available from your agent), updated for what is expected in the policy period being quoted.

– Your bank’s marketing materials, Web site address, sample brochures, and the like.

– A copy of your employee handbook.

– Applications from your current insurer for directors’ and officers’, bond, and e-banking insurance coverage. (Most insurers quoting coverage will work from your current insurance company’s applications.)

– Other information that may help underwriters to see the bank in a positive light. Some banks provide pictures or videos of virtual tours.

Get the underwriting information out to the agents at least one hundred days before the renewal date.

Be clear about when the bids are due to you and what format you want the bids presented in. If your bank’s board of directors is to be involved, add time to your schedule for their input. Specify that bids are due at noon on a specific date at a specific place. Events sometimes transpire to make it difficult for an agent to get bids in on time. You will have to decide if you will allow late bid presentations.

Should You Tell Everyone Your Current Premiums?

Obviously there are two schools of thought — tell and don’t tell. Those in favor of “don’t tell” say it keeps everyone on their toes. Everyone, that is, except your current agent. It’s an advantage to your current agent to have the competing agents in the dark over your premiums. It’s not a fair advantage.

I say tell. In my bid specifications, I include information on the current premiums by line of coverage. To me, this puts everyone on the same level. Everyone knows the current premiums. Nobody knows the proposed premiums.

Other Rules of the Game

Another question you will have to deal with in a bid is: will your current agent get the last shot at your business? It is a common practice for insurance buyers to give their current agents a last chance to match their competitors’ prices.

The logic goes like this: “We have done business together for a long time. My agent has done a great job and deserves every opportunity to keep our business.”

If this is how you look at your agent, then why are you bidding your insurance? Don’t put the other agents through the exercise of bidding if your current agent is going to get a last chance to hit the target.

The bid process should be fair and upfront. If, at the end of the process, you plan to give your current agent the advantage of a second chance, then you should reconsider going through the bid procedure.

Be clear and upfront about how the bid is going to be handled. If your current agent gets a second chance, you should tell the other agents at the beginning of the process. Give them a chance to walk away before they invest twenty to fifty hours on your bid process.

To me, the only fair bid is a bid that is decided based on the proposals presented. Notice I didn’t say that the best price wins. You should make your decision on services, coverage, and price.

Sample Bid Rules

Here is a statement you can provide to the agents participating in your insurance bid process:

We promise to deal openly and fairly with all agents and insurance companies.

Problems rarely “take care of themselves.” If you have a concern, issue, or problem, bring it up sooner rather than later.

Your proposals are confidential. We believe that an insurance marketplace that is fair and upfront is in everybody’s best interest. We will never reveal or share any competitive information you provide with any other agent or company prior to receiving their proposal.

In our bidding process, we allow the competing agents to review “current” policies and pricing. We believe that this puts everyone on an even playing field. Everyone knows the current year’s price. Nobody knows the bidding price when they submit proposals.

We do not give “second chances” in bids or proposals. We expect your best work from the start. Discrepancies will be addressed without revealing any other participant’s position.

We set deadlines in an effort to make the process work better for us. If you are going to miss a deadline, we are better off knowing as soon as possible.

Any proposal you provide will be reviewed on the basis of coverage, price, and services offered. We are under no obligation to purchase insurance based on price alone.

The information we provide to you is accurate to the best of our knowledge.

Information Meetings

Encourage participating agents to meet with you to gather information needed for the bid. It is also your chance to get to know the agents. Good agents will request these meetings. They will want to spend some time with you and the other decision makers.

This is the agent’s chance to learn about you. You also have the opportunity to see how the agent thinks and how he or she approaches the business. Competing agents may request different information or additional documents. Do your best to comply. I would urge you not to tell other agents (or your current agent) what information their competitors requested. Exposure identification is an important part of what an agent is expected to do. Tipping the hand of one agent hurts the competitive process.

Don’t play favorites with the agents. If you’re going to do that, why bother involving the others?

Bid Presentation

In the beginning of the bid process, you gave each agent a deadline. Allow agents to present their bids in any format they wish. Some will email, some will mail, and some will present in person.

Here’s another opportunity to learn about how the agent approaches the business.

Comparing Bids

Now comes the hard part. You have to compare the different proposals. I use two tools. One is objective. The other is subjective.

For coverage comparison, I find a matrix is useful. Make a chart with columns for each bid. Down the left side, list coverage limits and issues. A sample form is included in Appendix Two. You can also use the information in the various proposals for information on issues you should consider.

If you’re having trouble with the decision, here are a few subjective questions to ask yourself:

– Which agency would I like in my corner if there were a claim dispute with my insurance company?

– Which agent seems to be the most comfortable with the banking industry and the unique exposures that our bank presents?

– If my attorney had a question about my insurance coverage, which agent am I most confident would provide accurate information and assistance?

– If my administrative center were destroyed by a fire, which agent would I want on my team?

After Bid Interview

In cases where you are still undecided, it may be helpful to interview the agents again. Here are some general tips:

– Don’t divulge the other agents’ pricing.

– Don’t allow the agents to amend their price.

– What coverage is included in one proposal but absent from another? Ask the agents why there is a difference. “Bill, you didn’t include coverage for business income. Any reason why? Your competition included the coverage.”

– Affirm the service schedule that the agent promised. Will there be annual reviews, or will you meet quarterly?

Bid Ethics

The bid process is filled with opportunities for misunderstanding and abuse. As I’ve stated before, 85% of all insurance bids industry-wide result in the incumbent agent and insurer retaining the business. Many agents are no longer bidding insurance coverage because of the odds against them. Many choose to compete only on a broker/agent selection basis.

Here are some general thoughts about bidding:

– Treat all agents the same. Don’t play favorites.

– Promise the competing agents that the current agent will not get a “last shot” at the bid.

– Be upfront with each agent about your process and approach. Nobody can claim foul if the rules are spelled out ahead of time.