Bidding Coverage Every Year

[TomZ]

A prospect is asking me why he shouldn't bid his insurance every year. He says when he goes to bid his premium drops and he gets better coverage.

I'm urging him to wait and bid every three years.

Any words of wisdom?

[Jason]

Get away from price as the focal point. Yes, it's important but there's more to it than just price. Emphasize the company you're representing, strong rating, local adjuster, great relationship with your agency, etc. Give the account referrals of other accounts that are extremely happy with your carrier. Always sell coverage. And most importantly sell your agency's excellent service, your co-workers, your knowledge & experience. The list goes on and on......

If the account has been with you, than always ask if they've been happy with the service you've provided. If that answer is yes, you're over half way there.

If the account is just focused on price alone you'll eventually lose it. There's alway someone out there willing to cut coverages, even if it isn't in the insured's best interest.

[TomZ]

I'm not pushing price.

He contends that every time he bids his coverage he gets better coverage and a better price than he would have without bidding. His complaint is that insurers and agents charge higher premiums until they know they might lose the policy.

He has no complaints about the service he receives.

He is wondering what downside there is to him to bid more frequently than every 3 years.

[InsAgentSF]

A lot of companies also give discounts if they keep the policy for certain period of time. I was competing against one, last month, matched their price dollar to dollar and offered the better coverage and a better company. My was standard carrier vs their non standard. Guess what company did to keep the account. They gave them 10% discount, which on 55K policy is a big deal for a policy holder

[Porter]

I would tell the customer "your insurance needs to be shopped and reviewed every year and our agency can do that for you".

[AlstonCPCU]

I would just put pressure on the incumbent carriers to lower their prices.

[Victoria860]

Speaking from a company perspective, our company is able to track the submissions from year to year. We can tell a lot of the time how frequently the consumer is shopping by how many different companies we get loss runs from. Plus "shopping" every year puts the company at a huge disadvantage because the rates get driven lower and lower and at some point the company is not adequately pricing the risk for losses just to get the business. This is happening more and more as consumers are focusing more and more on price and truth is, there is more to insurance then the price.

In my personal opinion, every three years is good. Yes you should review the coverages every year to make sure that your client is getting everything that they need and talk with your underwriter if something is off or missing. More often than not they will work with you.

One last thing, look at other factors. Construction costs are on the rise. With the hurricanes last year a lot of companies are having to reexamine how they insure the wind/hail on certain states. Nothing is free or cheap anymore.

[CATHIEA]

Basically everyone gave you all the pieces of the discussion you need to have with this prospective client - save one. Unless this is a large account ($50,000 ++ per year) why would you bother to service the account and work hard to get it? He's just goint to shop you next year. The same will go for the carriers - especially if they see the same submission year after year. Do you think they're going to bother to offer quotes after a while?
He might be right that he has gotten better coverage and better pricing by shopping it if he's only been in business a few years (going from a non-admitted GA company to a prefered) - but after the first 3 - 5 years it becomes a crap shoot - until the soft market returns.

[volstrike3]

First let me say that I try to sell service and expertise but that does not work will all clients. When I have prospects that are extremely concerned about shopping price. I offer to work on a fee basis to bid his insurance and bring them the best price.

The catch is, you actually have to do a good job of shopping his insurance every year and have the paperwork to back it up. Even as an agent I get annoyed when carriers hold back on their best pricing until they are about to lose the account. You get the best of both worlds, you get paid the same regardless of which carrier writes it and you do not have to worry about losing the account every year due to price.

[LadyBroker]

A more important reason to bid his coverage every year is that coverage can change...just because your incumbent offers renewal doesn't mean the form hasn't changed. And it doesn't mean the carrier across town hasn't amended their form, and now it's better than yours. If you aren't willing to review your client's coverage every year, he'll find an agent that will do it for him.

Good luck.

[Jason]

Volstrike3, I like your idea about charging a service fee for those frequent shoppers. I'm curious how you do this and if there's decent money in it. Do you mind expanding on your set up. I'm curious how you come up with a fee, is it based on acct. size, diffuculty etc.

Thanks.

[kevinraz]

As an underwriter I'll decline an account if I see that we have worked on it for several years without any success. Why should I keep trying if we are not going to have a chance of writing it because it's all about price?

I used to be a commercial agent and I hated to work with these types. Like others have said I advised my clients to market every three years unless the market or their account has changed a lot. Usually these folks are busybodies who want every possible option presented, forcing the agent to do lots of extra work, then just keep what they have had in the past.

FYI as a proactive underwriter I'm taking market conditions into account when offering renewal quotes even if there is no competition.

[Forum Reader]

It's true that carriers and agents get tired of spinning their wheels in quoting efforts. Professionals can evaluate if there would be reason to justify a different coverage or pricing strategy from the previous year; otherwise, usually once each 3 years is sufficient. This is assuming the insured is satisfied with the program, the agent and the insurer. It cannot be true that every year the coverage and price gets better.

As for fees, watch state laws. Not all states permit you to charge both a fee and collect commission, or if you do, may prescribe specific disclosures or agreements that must be entered into. Check with your state insurance department if you are not familiar with all state laws governing your activities.

[jctwindad]

Lots of good comments. I sometimes pick up a new account that has been accustomed to "bidding" every year (seems to happen more with contractors because they live in a bidding world), and will often have to survive a couple of years of competition at renewal. However, a good agent will begin an educational process with the client once the account is written. Help them understand that when the same account appears on an underwriters desk each year, the account doesn't get the same attention each year. Instead of being on the top of the stack, it stays on the bottom, and more often than not, gets a quick declination. However, if the account only shows up every 3 years, and the underwriter knows that, they are going to try to secure the account, because they know it will be 3 years before they get another chance. Many of the underwriters who have replied have already told you this.

The other thing that I do is use a system to classify my clients. I use "A", "B" and "C". Some agents use Gold, Silver and Bronze. Whatever works for you. My best clients (about 25%) fall into the "A" category. Those accounts get every service my agency offers (loss control assistance, seminar invitations, frequent visits, etc.). My "B" accounts (about 50%) get some agency services, but not the full package. My "C" accounts (about 25%) get virtually nothing. We place their business and put it to bed each year. Accounts such as the one who "bid's" their account each year, would get a "C" classification. If I keep the business - fine, and if I lose it - fine. If I do lose it, I do not go back and requote in the future.

Ideally, you build a book of business with lots of A accounts, some B accounts and no C accounts. Review your book each year, and determine if an account should be moved up or down. I put many of the C accounts into a Special House Account unit. I explain my rating system to my clients, and let them know where they fall. The good accounts want to be A or B, and develop a relationship based on trust, not price.

Just some thoughts from a 30 year veteran, who has a $500,000 commission book, and rarely has any competition at renewal.

[doyourhomework]

The bottom line is that the client is king.

You can expostulate all that you want about going to bid every 3 years, but if he wants it bid annually, then he will find a way to do it and you will lose the battle.

Clients hear what they want to hear.....especially when it involves money.
That means you either play ball or play the lottery.