The process of choosing a broker is often guided by price because of pressure to meet stakeholders’ spending controls and achieve cost savings.
Other factors are often overlooked and unfortunately, we realise it when it’s too late. A broker is our gateway to the insurance market and selecting the right provider is a key to success of our insurance procurement strategy.
We should start with giving ourselves a time to make the right choice. The broker appointment should take place at least seven months prior to your insurance placement, this is a standard. When redesigning your insurance programme, you want to get the right balance between risk transfer and risk retention. This means you should allow yourself and a chosen broker even more time to prepare before you engage the market and go out to tender.
So, what it is that we should consider when choosing a broker? I’ve put together a practical checklist that you can use when choosing or renewing a broker contract.
The broker should become an extension to your risk and insurance team. Quality and credibility of the service team is one of the key elements you should focus on. Think about the frequency of meetings, responsiveness to queries, communication methods, day to day operational support, availability- these are all important components of account stewardship. A crucial question to ask is does the broker haves resources to service your account?
Knowledge about the sector and professional expertise
The broker is a professional specialist in handling the insurance business. That doesn’t mean that only the qualifications and experience of the broker matters. Factors such as the reputation of the service team, continuous development, staying up to date with market changes and willingness to share the knowledge with you matter too.
Ability to create competition
As a public sector buyer, our objective is to achieve value for money and it should be the same for brokers. The broker should be able to demonstrate to you the ability to create competition. This includes their negotiation and placing skills to get you the right cover at the right price. When appointing a broker you should consider the breath of market search undertaken by them when placing your insurance business. I.e. fair analysis of the market, limited market search or use of a single insurer with an access to bespoke policy wording.
Fees and remuneration
In the insurance industry, there is a never-ending story. The plot is around brokers fee, remuneration and a potential conflict of interest between the parties involved. To some extent you can take control of the situation if you have courage to push for a high level of transparency in the insurance contract negotiations. A starting point would be requesting disclosure of earnings and understanding in what way any placement recommendations affect the earnings.
It’s good to consider technical elements when selecting a broker but it’s important not to forget about the soft ones. You must feel confident that the broker will fit with your organisation’s strategy and objectives. Before you make your decision think about your organisation’s values and what is important to you. To make it easier think about all the things that are currently causing you troubles and focus on those when you’re renewing your broker contract.
Innovation and ability to challenge status quo
We always ask for innovation but do we really have time to consider what it means to us? What you need from a broker is a breath of a fresh air. Your broker should have ability to redesign your insurance programme but also challenge you on your practises and approach to risk management. Innovation and change in the status quo comes when you and your broker work together.
For more information speak to our specialist in insurance procurement Agnieszka Gajli on 01924 664675.