Agent Selection in a Bid Process – Case Study

Agent selection is the toughest part of the insurance renewal bid process. However, nobody seems to talk about the actual dynamics of the process. I thought a snapshot of my thoughts and considerations from a current bid project would be instructive.

This is typical of the issues and thinking behind assigning agents in an agent selection or renewal bid process.

To set the stage… The insurance buyer spends upward of $150,000 a year on insurance. They have worked with the current agent for 5 years. The agent has done a great job. The client is quite comfortable with the service and coverage they have. The agent has managed claims and policy service issues very well. The client is bidding this year as it is a public entity involving taxpayer money. There is an obligation to seek bids every 5 years or so.

Agent selection questionairres were sent to five different agents and to two “industry” programs run by trade associations. All seven organizations responded with interest.

Now we have to decide which agents and insurers will be allowed to participate.

Here are the insurer requests (ranked by preference) of the five agents:

Agent Thomas – The incumbent

1. Insurer Oak – The current insurer

2. Insurer Maple

3. Insurer Pine

Agent Fred – Industry specialist

1. Insurer Maple

2. Insurer Pine

Agent Sam

1. Insurer Maple

2. Insurer Pine

Agent David

1. Insurer Maple

Agent Sarah

1. Insurer Maple

2. Insurer Elm


-Thomas is the incumbent and doing a great job for the client.

-Fred is an industry specialist and has a great relationship with Insurer Maple. I have worked with this agent extensively and think quite highly of his abilities. The client has no relationship with this agent.

-Sam is a local agent but has no relationship with the client. He has not differentiated himself in any way.

-David is an agent from a hundred miles away and has no relationship with the client. He has not differentiated himself in any way.

-Sarah is a local agent with no relationship with the client. She has not differentiated himself in any way other than requesting a market nobody has mentioned.

-All agents have fine reputations and handle other clients in this industry.

-Insurer Oak (the incumbent) has been a major force in this industry for 20 years, as have the two association programs. The client is pleased with the insurers work and claims process.

-Insurer Maple is the successful newcomer, making great strides in the past year and lots of noise this year. They are a competitive factor.

-Insurer Pine is an unknown. They have made noise in this industry, but never showed anything in past years. They are a fine, general insurance company.

-Insurer Elm is an unknown. No other agent requested this market, and to my knowledge they have never written such an account in the state.

The task is to select agents to participate in the bid and assign insurers that will give the best result to the client while keeping competitive forces aggressive in the process.

The easy part is:

-Both Association programs will be a part of the bid. They each offer viable competition to the other insurers.

-The incumbent agent will get the current insurer. At a minimum, the agent and insurer have earned that.

-Sarah is the only agent to propose using Insurer Elm. Sarah gets Elm.

What to do with Insurer Maple and Insurer Pine?

Sam and David bring nothing special to the bid process. They are not bad. They just have not differentiated themselves in any way.

As Fred is an industry specialist, and has a special relationship with Insurer Maple. The logical choice seems to be to give Fred access to Insurer Maple.

However, the client is quite reluctant to change agents due to the exceptional service they perceive that they have received. I asked the client if another agent presented a proposal that was 20% better (price and coverage) than what the current agent presented, would they switch? My client says they might not.

So, I have a situation where if Maple, through another agent, brings a 20% improvement, my client may pass up on the savings to stay with their agent.

I think that there is a better than good chance that Maple will win the bid on coverage and price – based on what they did last year and what I’m hearing about this year.

If I do the logical thing (give Maple to Fred), my client could ultimately end up spending more and getting less coverage.

My recommendation to my client is to give their current agent access to Pine, Maple, and Oak. Agent Sarah will be allowed to access Elm and the two association plans will make their proposals.

I have long said that broker selection and market assignment are the toughest part of the bid process. I know that Agent Fred will not be pleased with my recommendation and will probably not understand my reasoning. However, I must do what is in the best interest of my client.

A successful end result of this bid process will come from stiff competition. The current agent will have to make his insurers perform to compete with the association programs and each other. Agent Sarah gets to play her wildcard.