Why having one, exclusively appointed broker gets you a better deal in the insurance market
Appointing the right advisor to act as your representative to insurers will mean that you obtain the broadest, most appropriate and adequate cover for your business at the cheapest premium. See our article here on selecting an appropriate insurance broker.
But why is it advisable to appoint one advisor to represent you exclusively rather than having multiple brokers compete for your business? In considering this question, we look at how the insurance marketplace works and the process your broker undergoes to deliver the best available risk management program:
Better negotiating power and market leverage
Insurers are less inclined to provide quotes when multiple intermediaries are engaged to canvass them. This is because they are unsure which intermediary will be successful and they do not wish to “quote against themselves”. On this basis it is less likely they will provide best terms.
Are the quotes the same?
Each advisor will present the recommended terms that they have sourced and arranged to you. Each advisor will have a different understanding of your risk. Insurers have different policy wordings that provide different coverage. Price, policy terms and conditions will vary by broker. Therefore it is impossible to compare quotes without considering all the variables they encompass and possessing a full understanding of those variables.
Narrow duties of the insurance broker
In the context of the point above, one advisor may not have the benefit of terms that have been recommended by another advisor/offered by an insurer who quoted that other advisor – that is because where there are multiple advisors involved, insurers may elect to “reserve” their terms to one advisor and not offer them to the other.
There may be significant cover between the two quotations. In circumstances where you appoint broker A over advisor B, you are selecting an advisor whose advice may be to bind cover on less favorable terms. This is a significant risk to the business: the reason an advisor is engaged is for the Board to discharge its duties to the company to maintain adequate insurance. Where the Board assumes to accept coverage by virtue of appointing one advisor over another advisor, the duties of the appointed advisor are narrowed because the Board had the alternative quotation option, which may have covered a loss, but accepted the proposal of another advisor, who did not cover off said loss.
Otherwise, it is not in the best interest of your company to be annually going to the market with three different advisors. We attach our article here traversing the “pro’s” and “con’s” of re-marketing every year. In short, insurers look for long term commitments with their clients and those that have had long term commitment tend to experience much better consistency in premium rating. Not to mention, there has been significant benefits to loyal insureds with regard to management and payment of claims.
It is very common that where an insured goes to market every year, represented by multiple advisors, insurers will not take time to provide quotations, fearing it would be a waste of time and resources to do so.
Summarily by having one advisor you will get the best deal on your general insurance. You may rely more broadly on a single advisor’s advice whereas reliance on advice of multiple advisors may skew the duties they have to you or your company. Having one advisor retained to insure you for all risks will mean as a director, you are a step closer to discharging your duties to the company to maintain adequate and appropriate insurance.
To discuss your insurance needs with one of Bellrock’s experienced advisors, please contact us via the form below.