Construction companies tend to spend a whole lot of money annually on insurance premium. Too much money, if you were to ask them personally. (I’d agree with them on that, too!)
Frankly, most of them spend way too much money, but they don’t possess enough knowledge of the insurance quoting process in order to make the wisest decisions when the time comes.
Or rather, their insurance agents have not made it easy for them to determine which insurance carrier is offering the best insurance quotes overall.
Problems With Gathering Insurance Quotes
One of the hurdles that many contractors experience when it comes to bidding out their insurance is that they assume the insurance quoting process is exactly like the construction industry. Typically, in the construction industry, a general contractor or project manager can requests bids from subcontractors and receive dozens of quotes.
Whether unfortunately or fortunately (I think fortunately), the insurance industry does not work that way.
Insurance carriers will only ever work with (accept a submission from) one agent per insured. Therefore, when a construction company allows Agent-A to submit to Carrier-X, then Carrier-X will never accept a submission from any other agents that year on your behalf. Therefore, it is highly important for contractors to become informed of the renewal process in order to obtain the most favorable terms and competitively priced insurance quotes available in the marketplace.
8 Things a Contractor Should Do to Save Money On Their Renewal Insurance Quotes
- Assign the insurance markets to each agent you use (if you plan to use more than your current agent). Don’t allow your current agent to “blanket” the marketplace place and “block the markets.” (It is easier for an agent to show up with a more expensive quote when he or she knows you don’t have any alternatives. That is, unless competition is added to the equation!)
- Give each agent who quotes your insurance access to ALL rates, exposures, and the expiring policies themselves. (Put everyone on an even playing field.)
- Set deadlines upfront for when you expect to receive each and every proposal from them. (I would suggest setting a deadline of no less than two weeks before your renewal date. Have the agents agree, in writing, to abide by this very necessary step.)
- Require that each agent give you a complete copy of each quote he/she receives, as well as written confirmation from the insurance carrier directly for any declinations received.
- Once you receive all your quotes, create a comparison between them and make a decision on which quote you would prefer to bind coverage with.
- IMPORTANT STEP COMING: Negotiate, negotiate, negotiate. (It is amazing how many times an agent shows up with a quote and the insurance buyer agrees to purchase it without any negotiation on the terms or pricing. Tell—not ask—your agent that you want to see another 10% – 15% off the quote in question.)
- Most underwriters “pad” or “inflate” their quote, with the mindset that they could lower the premium more if need be. As a general reference, there is usually another 10% that can be taken off the price, if someone would only ask for it. (Have the agent give you written confirmation, from the underwriter directly, of what the carrier can or can’t offer for premium credits/discounts.)
- Once you negotiate the pricing down and any better terms (less exclusions, more favorable endorsements, etc.), bind the coverage.
It is not an exaggeration to say that there is usually a 10% padding on the premium for each quote an agent receives, for every line of coverage quoted.
QUESTION: Why doesn’t your agent request the underwriters to remove that “padding” and offer the lowest quote possible, up front?
ANSWER: Because every dollar taken off the premium is money taken out of the agent’s commission check. It is for this reason that the agent is never truly looking out of the insurance buyer’s best interest.
In order to ensure the best results in the insurance renewal process, a construction company will literally save thousands (if not tens of thousands) of dollars by hiring a fee-based insurance consultant, such as Constructive Risk.
Please contact me for a free consultation regarding how much premium I may be able to save your company.
Like the article says, too many contractors accept the first quote they hear without negotiating. They might assume that they won’t be able to do any good negotiating, or maybe that the quote was better than they expected, but it is always a good idea to negotiate. The quote isn’t going to get higher, but it very well may get lower, so there is no reason not to negotiate.
Very true, thanks!