How to Find the Lowest Cost Insurance Program
Each insurance company underwriter will receive as many as 100 applications each month. To meet his or her goal, each underwriter typically needs to write less than 10 of the submitted accounts (new and renewal) each month. Underwriters decline to even quote on the vast majority of applications they receive.
You are truly competing with other businesses for the attention of each underwriter, and this competition is largely based on application quality. Having successfully negotiated insurance programs for hundreds of clients, we have learned that to negotiate the lowest pricing possible on business insurance, extremely strong applications and arguments - or specifications - are critical.
Because business insurance pricing is based on many subjective underwriting considerations, a great, written argument must be made, much as if you were going to court.
The minimum, required information to generate a poor quote is actually quite small. However, because of the subjective nature of underwriting, the information necessary to generate a great quote is quite broad. Going well beyond the required information is tremendously effective in producing more quotes and much lower pricing.
Specifications must not only provide the basic required information, but also make dozens if not hundreds of arguments as to why your risk is far lower compared to that of any other similar businesses. There are hundreds of potential arguments: better hiring, training, safety practices, work exposure, management experience, etc. etc. However, very few brokers go to the lengths necessary to get a great deal (ask any underwriter).
Broker experience in building such arguments is usually lacking. Also, putting such arguments together is hard work, requiring hours of interviewing, organizing, revising, analyzing losses, exploring potential new arguments, etc. Underwriters will tell you that brokers - as a rule - do not produce great specifications.
The Role of the Broker
However, the effort is needed on every risk, no matter how apparently simple the risk, in order to:
- Make the submission stand out to over worked and overloaded underwriters.
- Eliminate underwriter fear.
Underwriters fear having a loss from a exposure that the underwriter should have known about, but did not. By putting all of the descriptive arguments - in writing - the underwriter becomes comfortable with the risk. Underwriters care less about the exact premium on any one account, and will price an account aggressively, once they are comfortable the risk has been fully explained. Any one account may have a low or high premium - the underwriter is typically judged on the results of hundreds of accounts.
- Allow the underwriters to defend themselves.
What underwriters really care about is being able to defend the decision to write the account at all, should adverse loss experience develop on that account. By putting all explanations and arguments in writing, in the underwriter's file, the underwriter can be more aggressive, knowing the underwriter can defend their decision to write the account - and their job - should something go wrong.
- Make the underwriter’s job easy.
- Entice the underwriter to quote easily (without a long series of time consuming follow-up questions.)
- Make underwriters more aggressive on their pricing, because the explanations and arguments justify superior pricing.
In summary, great specifications (with numerous detailed arguments about why your risk is superior) produce more quotes, more comfortable underwriters, and much lower pricing.
In addition, consider that the information gathering process is lengthy, time consuming and frustrating for all, including the broker and your staff. It is the single biggest reason brokers often:
- Perform poorly on new accounts
- Deliver quotes late
Most insurance buyers have experience with brokers who have not made a strong effort. Underwriters see the same every day.
A New Approach
However, once the information gathering process is completed for the broker in advance – and further, the broker is provided with strong arguments for a great quote – any broker can become a better negotiator. The heavy lifting is done, and talented brokers will then be eager to persuade their favorite underwriters to quote aggressively.
Client Control
By delivering great specifications, the client now controls the process. If the client wishes, more brokers and underwriters will now work on the account. (You also save time answering broker and underwriter questions, if the specifications are done right, one time, for all.)
A World of Options
Instead of turning away the many insurance brokers who call you, with a mouse click you will now have the option of sending complete specifications at any time to any broker or insurance company that might have something of value to offer your company.
The time-consuming process of information gathering - which for so long has been an impediment to obtaining more quotes - is now over. When you learn of a new specialty insurer, or a captive, or any other viable option for your insurance, you can now obtain a quote with almost no effort at all.
Encourage the best brokers and insurance companies to look at your risk, because it is now easy for them to do so.
Quite simply, this is the way insurance should be done.
Specifications - Potential Arguments
Basic Required Information
Payroll by Classification
Loss History
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Potential Additional Arguments
Payroll does not accurately reflect exposure, because:
Losses do not reflect future exposure because:
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The above is for descriptive purposes only, and is therefore extremely brief. There are typically hundreds of potential arguments on each account.
In addition, Net Cost Advisors will make many recommendations which, if adopted, can allow for further arguments about the improved/superior nature of the risk.
In addition, Net Cost Advisors will make many recommendations which, if adopted, can allow for further arguments about the improved/superior nature of the risk.