C.R. Ekern & Company - Quote Contest: A Recipe For Disaster

Quote Contest: A Recipe For Disaster
By Rob Ekern
National Underwriter, March 11, 2002

The hard market cycle has created significant challenges for agents and brokers across North America. As the marketplace continues to change, buyers and prospects accustomed to reducing costs by seeking competition between insurance carriers and independent agents are becoming more frustrated.

"We have decided to seek alternative quotes this year," clients proclaimed in the past. "What three carriers would you like to be assigned?"

This is a recipe for disaster today. This antiquated process serves no one's best interest. A "Consultative Broker" (a service mark of my firm) fully understands the reasons why the "old" marketplace selection process is no longer viable for clients:

• At this time, like never before, the ability to market a client’s program must be done in a very skillful manner. The marketplace selection process does not account for the different skill levels of brokers. It is based solely on who is assigned markets or can run a photocopier the fastest.

• Sending multiple producers into the marketplace is not in the client’s best interest. This is because the client needs his or her story told by one strong consistent voice. During this time of upheaval, a confused underwriter will translate into higher costs. The producer must have the authority to "lock and load" when the right terms are negotiated.

• In many cases there are not three carriers available, let alone enough for multiple agents to compete. As the recent "C. R. Ekern & Co. Marketplace Survey" reported, in 45 percent of the cases there are two or fewer carriers with the appetite for any given risk.

The alternative is educating the client to utilize the "Brokerage Selection" process in competition. This process is by far the most effective method of selecting an agent. It provides buyers with the best value and the agent with a method of differentiating the organization. It is a much better system of competition.

The brokerage selection process involves the producer and several other selected brokers competing for an account on a conceptual basis. The process never involves using the insurance carriers as the basis of differentiation. The selected broker is given complete access to the marketplace and the exclusive authority to negotiate the renewal on behalf of the client as the agency of record.

When working with the brokerage selection process, a producer must practice extreme patience. Each prospect contact is an opportunity to demonstrate the benefits of the agency, learn issues, deploy resources and establish deeper relationships. The goal for the producer is to demonstrate his or her unique ability to reduce the buyer’s total cost of risk.

Here is why the brokerage selection process is the best method for all parties concerned:

• Most busy prospects and clients do not like to be interviewed by multiple loss control engineers sent by agents to analyze their account in order to present bids. They simply do not consider this to be the best use of their time.

• It allows each of the producers to leverage the benefit of their quality organizations. The firms that have invested in "Consultative Brokerage" development and resources will win based upon merit.

• Most insurance carriers are reserving their capacity for quality accounts. They insist upon knowing that the agent has the authority to speak for the client and is not simply scouring the marketplace in a bidding situation.

But I can hear some agents saying now: "You make it sound so simple. What about the case of the prospect who insists on using the marketplace selection process and demands bids from competing agencies?"

In that case, the agent must use the full range of his or her persuasive abilities to demonstrate honestly to the prospect why the old process is not in the client’s best interest. In the event you cannot convince them, walk away. Use your time and effort to find other prospects who will respond to this favored method.

Successful agents and brokers are learning to do business exclusively by the brokerage selection process. It is the only way to deliver a quality product and grow profitably. Those who regularly practice this method have turned a recipe for disaster into a five-star meal.

Rob Ekern is President of C. R. Ekern & Company in Phoenix. His firm provides consulting, training, and Webcasting to regional brokerage firms.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, March 11, 2002 Copyright © 2002 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.

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