The Weekly Thought

Competitive Insurance Bidding in This Covid-19 Hard Market

I have encountered an interesting phenomenon this year regarding the interest, or lack thereof, of brokers for participation in competitive bidding exercises for commercial clients. In many instances, brokers are walking away from new business opportunities unless they are awarded the client’s business before they even offer insurance quotes. Brokers are open to a selection process RFP, but less open to working to secure competitive insurance quotes before being considered to replace the incumbent.
The concept of a brokers seeking to win new business in a due diligence process leading to a broker of record award, short of offering competitive insurance quotes, in not new. What is new, is the relatively prevalent position of many brokers to forego opportunities if they are not granted complete access to the marketplace, without the participation of any broker competitors, including the incumbent where they ask for broker of record authorization to replace the incumbent.
Just about every RFP process that we have initiated on behalf of our clients in 2020, wherein the ground rules include more than one competing broker, has resulted in the declination to participate by at least half of those invited.
Part of the driving force behind this strategy is the thinness of the insurance marketplace, in every industry segment, due the “hard” insurance market, which began nearly three years ago and has accelerated during the Covid-19 timeframe. Many brokers simply do not wish to expend their limited talent and resources on opportunities that are not already granted exclusive representation of the insured client.
In our experience, the best results for our client often occurs with a controlled competitive bidding process, using two to four competing brokers. Each broker is provided with the same coverage specifications and exposure and loss information. Each broker is assigned exclusive access to their prioritized list of insurance companies, from which they are asked to obtain quotes.
The process concludes with a comparison of the insurance options proposed by each broker, with the bid awarded to the one most appropriate for the client. That is, the best coverage, for the best price, with the most qualified broker and insurance company partners.
Despite the reticence of many brokers to participate in competitive bidding exercises, we have been successful in finding and qualifying brokers and insurers to offer competitive quotes. Sometimes it takes quite an effort, but that effort nonetheless offers the best solutions for our clients, even in this tough marketplace.
It is because of this tough environment that it is more important than ever for clients to seek competition in the insurance marketplace.

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