Buying Business Insurance: Assigning Markets

Assigning markets is one way some businesses shop their insurance.  Assigning markets means that you have several insurance agents take your coverage to assigned insurance carriers.  There are Pros & Cons to this approach and I’ll review them here.

This article is the fourth in a multi-part series examining the steps businesses have when evaluating and buying insurance. By knowing your options and what a typical process looks like, you’ll know what to expect and can make the most of your time. 

Part One: ‘Why You Buy’ Should Inform ‘How You Buy’
Part Two: What to Expect When Buying Business Insurance 
Part Three: 3 Common Traps and How to Avoid Them

Assigning Markets: Background

Assigning Markets is a practice used by Business Owners to shop for insurance because of how insurance brokers interact with insurance carriers. The vast majority of insurance carriers will only offer an insurance proposal to you through a single broker.

Insurance coverage can vary greatly by the types of coverage selected, as well as how a broker presents the business to the insurance company.  If insurance companies offered quotes to every broker that requested it, it can become very confusing for everybody.  So in insurance, we use a system of Broker of Record – the first broker to make a submission is named the Broker of Record on that account, unless a formal Broker of Record letter supersedes the original.

Add in here that most brokers will only approach a few insurance carriers (typically 2 or 3), some business owners want to cast a wider net in the hopes of getting the best insurance premiums.

In practice, a business owner will bring in a few different brokers who each submit the carriers they’d like to approach.  The business then assigns specific insurance carriers to each agent.  This avoids multiple submissions to the same insurance company (as long as everyone is playing by the rules).

The Advantages of Assigning Markets

There are a few advantages to the insurance buyer when using this tactic.

First, you can approach more insurance companies than you could by using just one insurance broker. This works in your favor if you work in an industry that many insurance companies target and can provide the specific coverages you need. If there are really only 3 or 4 real possible landing spots for your business, there is less of an advantage here.

Second, an insurance broker might have a specialized market that only they can access.  This is more rare than you might expect, unless you’re operating within a very niche vertical.

Third, it keeps your current broker honest.

Keeping Your Broker Honest

Is there trust between you and your current insurance broker? I’m hopeful this is the case, but in reality there are situations where you might feel the need to keep your broker honest.

It’s unfortunate, but probably not a surprise, that this is something that needs to be done. I’ll go into a little more detail about this to help you understand good reasons for keeping your broker honest.

Most insurance brokers have all the same markets – or at least largely similar ones. Some brokers employ a practice of “blocking the market” by using the Broker of Record system (as detailed above). By “blocking the market,” a broker can keep other insurance agents from accessing that carrier and can keep more control of insurance premiums.

Here’s an example of how this might work:

You’ve had the same insurance broker for the past 10 years.  You like the broker personally, and they do everything right from a service and transaction standpoint.  Every few years, they shop your insurance for you with their other insurance carriers, but the carrier you’ve been with always comes back with the best pricing. They show you things like alternate proposals and declinations of coverage as proof of their efforts.  What you don’t see is what goes on behind the scenes. Some of what can happen that can be misleading include:

  • Other carriers are given slightly misleading information about your operations that leads to a declination of coverage.
  • Proposals are reviewed online in rating systems and never brought to an underwriter. These can show significantly higher premiums than what that carrier might be willing to come back with, given the chance.

If your relationship with your broker is mostly of a transactional nature, there is good reason to look for other options and even to keep them honest with the pricing they’re getting you.

However, if you know that you’re insurance broker is trustworthy and acting with your best interests in mind, you might not have the need to keep him or her “honest” by shopping with other brokers.


The Cons of Assigning Markets

In the previous section, we touched on how your relationship with your broker might be of a transactional nature.  I’ll try to clarify what I mean by this.

There is great value you can get from an insurance policy.  The peace of mind in knowing your business is protected from things like fires and lawsuits.  The actual coverage and financial reimbursement you get if you ever have a claim.

But as long as your broker and the carriers they bring to you are technically sound, this is something that you can effectively get with any insurance broker.

The real added value that an insurance broker can bring to you is in the things that happen outside of the placement of your insurance policy and the service transactions that occur throughout the year. These are things that help you prevent claims, improve your overall business operations, and help you to be more profitable.

It’s rare that a business paying less than $100,000 in premium actively gets this type of support.  When you assign markets, the insurance shopping process becomes more of a price comparison between vendors.  There is still good reason to consider your options, but it’s important to remember to qualify who you’re looking at. You’ll want to make sure that you’ll get the same type of value-add support with another broker.

Aside from making sure you’re working with the right brokers, the other major downside is the amount of time you’ll need to do it right:

  • You might have 3 or more meetings with each broker
  • You’ll have to provide a depth of information, and sometimes different information to different brokers
  • You will need to compare the proposals carefully to make sure they are comparable

So What’s Right for You?

Maybe there’s an in between?

Let’s say that you like your broker and you have trust with them, but you’ve been with them for 5 years and you want to make sure you’re not missing anything. Interview other brokers based not only on personality fit and technical knowledge, but on how they can help your business beyond the insurance policy.  Pick the best one and let them pick their markets after giving your broker first opportunity.

Taking this approach will still let you test the waters, but you’ll avoid the traps that come with looking at too many options.

Business Insurance Buying Guide: To Be Continued

I’ll be posting new articles to add to the Business Insurance Buying Guide, so please stay tuned for more information.

You can follow me on LinkedIn here  or on Twitter @RyanWStillwell.

If you’re interested in learning more – or just having a conversation about your insurance and risk management programs, please give me a call at (215) 499-5185 or book an appointment with me here:

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