1. “Blocking the Market”

Underwriters often complain that a broker’s application for a particular risk is simply “blocking the market”. This means the broker is not serious about receiving a quote from that underwriter. The broker is merely making sure that no other broker can receive a quote from that insurance company for the client. Underwriters suspect a broker is blocking the market when the application is incomplete or weak, or the broker fails to answer the underwriter’s questions about the risk. Clearly, this very common practice is not in the client’s best interest.

2. “Flooding the Market”

This is another common phrase in the industry. “Flooding the Market” is simply “blocking” as many markets as possible.

3. Insurance Company Access

The ability to access a particular insurance company has little to do with obtaining a great quote for you. There are over 1,000 insurance companies in the United States. Since underwriters decline as many as 90% of accounts submitted, brokers must usually work hard with each underwriter to generate a quote (let alone a good quote). It is hard for a broker to seriously engage more than 2 or 3 underwriters in any one account quoting effort.

4. Spreadsheet Marketing

Displaying a long list of insurance companies that received an application for your risk does not necessarily mean a broker worked hard on your behalf. An indication is a large number of declinations from underwriters, or “indications” instead of firm quotes.

5. Relationships with underwriters

For even the largest brokers, good relationships are maintained with only a handful of underwriters, limiting each broker’s ability to get a great insurance quote from the rest of the marketplace. It is virtually impossible for a client to determine where a broker has the best relationships, but that relationship is critical to building a great insurance program

6. Great Deals

Great insurance deals are obtained through hard work by experienced brokers. This is required on virtually every renewal. Underwriters must be persuaded to give your risk their best pricing discounts. As this is usually the most important service a broker offers, it should not be delegated to anyone who is less talented than your broker.

7. Specifications are Critical

The basic applications and loss information needed to obtain a quote will usually generate an average to poor quote. To receive a great quote, written arguments must be made, much as if you were going to court.

8. Broker Compensation

Most individual brokers receive significantly more income for new accounts than renewals, and therefore, many brokers focus their attention on new business, at the expense of renewals. This is one reason a broker’s best work is often performed on new accounts to that broker.

9. Excess Commissions

At times, insurance companies will offer brokers additional commission, so-called “excess commission”, to encourage brokers to steer business to that insurance company.

10. Commission

Commission payments, being greater for fully-insured programs, work against the pursuit and presentation of deductible plans, self-insurance, and other programs where the insured retains risk.

The harder insurance market today should lead clients to retain more risk.

11. “Profit Sharing” Agreements

Virtually every brokerage firm receives additional, year-end compensation from a few insurance companies for volume of business written or for profitable business. These payments are in addition to the commission or fee paid specifically for the placement of the account. These payments, which can amount to 10% of agency revenue, and at times, can work against a client’s best interest.

12. Hardening Market

Profit sharing payments tend to rise in a hardening market, when insurance companies become more profitable