Middle Market Insurance Buyers Should Set High Expectations

There was a great article a few months ago in Rough Notes, an insurance trade journal. The author, Larry Linne of Sitkins International, asked a business owner who pays about $1 million in premiums each year what the business owner needed and expected from his insurance agent. The owner gave a litany of complaints, but the most striking comment in the article was this: “It is interesting that they call the payment a ‘premium’ for insurance and those basic services. I bet they would never rename it a ‘bargain.’”

This business owner is right. He does pay a “premium” and expects, and should receive for $1 million per year, premium service and advice. I’ve heard one of his complaints from many insurance clients: “My agent promises this and that and “value-added service,” but the only time I actually see the agent is right before renewal.”

If you are a “middle-market” insurance buyer, defined by Greenwich Associates, an insurance research firm, as any company with $100,000 to $2.5 million in annual premium volume, brokers are probably beating down your door. According to Greenwich Associates, no one broker holds more than five percent of the middle market, and many of the large brokers who typically place coverage for large self insured corporations or global risks, are currently acquiring agencies to compete in this segment. And since at any time, approximately 20 percent of the middle market is considering changing agents, Greenwich estimates, competition is fierce and getting fiercer.

Stellar customer service should be a given for middle market insurance buyers. But there is more for business owners to consider when buying insurance than good customer service. Here are a few value-added services I believe business owners should expect from their agents.

• Your agent should understand, really understand, your operations. This means he or she should come on site, tour your facilities, and speak frequently with your management team. If you manufacture golf balls, you probably have a fairly uncomplicated operation. But if you manufacture and ship aluminum products to ten nations, your exposures are going to be much more complex. Your agent should understand and have experience insuring the type of business you run.
• Your agent should be able to measure the results of what he or she does for you. Your agent should be able to quantify actual cost savings provided for your account, whether savings arise from premium reductions or losses avoided.
• You should be able to call your agent about any risk problem you are having, whether it is an employment issue or a safety problem. Your agent should be able, within forty-eight hours, to bring resources to the table from your insurance carriers or other resources that can help you solve your problem.
• Your agent should be able to tell you when he or she cannot help you place coverage. They should refer you to someone who has more experience in coverage lines where they lack experience. Why don’t most agents do this? Because allowing another agent to help on your account is like letting the camel’s nose into the tent. We all know what happens when the whole darn camel is in the tent.
• Your agent should review your loss history with you quarterly, or more often if needed, and provide insight in claims reduction as well as assistance on stalled or problematic claims.
• Your agent should be able to recalculate your experience modification factor and tell you exactly which employees are costing you the most.
• Your agent should know when you need help from risk management experts and refer them to you for detailed assistance.
• Your agent should meet with you or send emails regularly to remind you of the services the agency and your carriers offer. Many agents give you a list of their offerings at renewal. You have a lot of things on your mind, including making a profit, so you probably forget or procrastinate. Your agent should gently nag you until you take advantage of their offerings. It is to your benefit to allow them to help you.

If you are a middle market insurance buyer, you probably spend more money each year on premiums than you do on legal fees, and a great deal less time with your agent than you do your attorney. Your insurance agent should be a trusted advisor just like your CPA or lawyer, not just someone who, once a year, manages your renewal process. If you aren’t receiving true, value-added benefits you can quantify from your broker, then perhaps when another agent calls, it is time to say, “I’d love to meet you.”