The process of putting an insurance program out to bid or a request for proposal (“RFP”) can be very time consuming. The decision to do so cannot be taken lightly. The bid or RFP process is very time consuming for all parties and your business should have a clear plan on what it is that you hope to accomplish.
A better question may be, why do you want to bid your Insurance Program?
Here are some common reasons that businesses will put their insurance program out for bid are:
When placing an insurance program out for bid, planning will be critical to ensure the process goes smoothly and your goals are met. It doesn’t matter what size your insurance program is, please remember that insurance is not a commodity, it is a way for your business to transfer risk from you to an insurance carrier. This risk transfer will protect and prevent your business or company from going out of business if a claim occurs. In this industry, no two polices are the same and each insurance company proposal needs to be reviewed thoroughly for correct coverage.
When placing your program out for bid, you should have a clear idea of what exactly it is that you want to accomplish.
Here are a few ideas.
Your business has a couple of different options when placing your insurance out for bid. There is no right or wrong answer in which process you should use. The bid strategy should align with your objectives.
This is the most common bid strategy for businesses nationwide. In this strategy a business will create a minimum coverage requirement document or provide a current copy of the policy and then allow brokers to go to the market and solicit insurance on their behalf. While this may be the most common, it’s also the most cumbersome. Insurance Carriers will only allow one agent to present their offer in most cases, and this is determined by who submitted an application first. Once this happens no other agent(s) may negotiate or work with that carrier.
Businesses may think that this is the best way to receive a proposal, but when you have multiple agents trying to negotiate with multiple carriers, the only real driver for most businesses is the lowest price. The reality is the lowest price doesn’t always mean the same coverage.
Here is an example.
Often on a summary or declaration page, the limit on a Business Income Policy might say ALS (Actual Loss Sustained) or a coverage limit. Deductibles can vary from 0 to 72 hours or more. Depending upon the needs of your business though you may need to refer to the fine print in the policy to get the coverage that you want or currently have. Do you want coverage for payroll even though your employees are not actively at work? You might if they are highly technical and hard to replace. The last thing you want is to re-open and not have the staff needed to produce products. Do you want your period of restoration to be longer than the normal 30 days? What about 60, 90, or 120 days?
This is an oversimplification of one of the many coverages available on a policy and uniqueness. But the key point to take away is that if your business is trying race to the bottom for lowest premium, key discussions on proper coverage for your business may not happen. Simply showing Business Income ALS on a summary doesn’t mean you are going to get the same coverage quoted.
Right Company/Wrong Agent
Another common problem that can happen in this scenario is that you might get the company you want to insure your company and that provides everything you need, but you might have the wrong agent associated with it. So in this scenario you may have the right product with wrong service.
Another common strategy is for a business is to do an RFP for brokers. This may be common when you believe that you have the right insurance carrier to properly cover your business but you want to see what other options are out there in terms of broker capabilities and value added services. Your current broker may have taken a position elsewhere or you simply want to find a broker with the qualifications that you require or perhaps you have a service issue. This process is very similar to hiring a person to fill a position in your company.
Most often, this process searches for additional skills or risk management services that may not be provided right now. There is no pressure on pricing at this point, and you can really find the representative that fits best with you and your company culture. Your company also can ask brokers to submit their qualifications and fee structure based upon your current program.
In this strategy you’ll work with your current broker to solicit your current or desired insurance package to the marketplace. Because you’re working with one broker they’ll have familiarity and understanding of what it is specifically that your business is looking for. This one broker should be able to effectively communicate your company culture and desired program to the marketplace. They’ll be able to compare and review the proposals that have been received based upon the original agreed criteria and able to properly advise you on what your best options are. If your broker is working on a fee basis, they can be impartial when helping you place your coverage without worrying about carrier influence.
They may be able to successfully position two carriers against each other further lowering premium or broadening coverage. When one broker is going to control the entire process, they’ll be able to manage all areas of negotiation and be familiar with the market players.
Regardless of which strategy you decide on, it important to try and be as professional and responsive as possible to the bidders. They may be evaluating you just as much as you are evaluating them.
When it comes time to plan an issue your company’s request for proposal, there really isn’t one uniform template that can be used. The RFP process can be as unique as your company. The information that follows below his general in nature and may be used to help guide your company as you determine what information to include in the RFP.
Depending on the type, size, and scope of the RFP you may want to consider using a consultant.
Most RFP’s include the following information from your organization that will be provided to potential proposers.:
Here are some common questions found on a Request For Proposal the your company may want to ask the proposing bidders.
If your RFP is asking for bids, then you’ll also want to have a minimum requirement document that bidders should use when obtaining quotes as well as outlining any deficiencies in their quote.
Once the timeline for the process is ended and the appropriate responses have been received it’s time to score the proposal. Score the proposals based upon the criteria originally outlined in the RFP. If there are multiple decision makers involved such as a board or team, the person in charge of the RFP process should provide education to assist the team in the scoring process.
Key components to the RFP Scoring are
When your company is making the final decision for selection, ask yourself the following? These questions are especially important when comparing various brokers and insurance carriers.
Your RFP has finally come to an end and it’s time to announce the successful bidder. Traditionally you’ll want to notify the losers first, so they don’t learn of your decision from the winner. The industry is fairly small and this will be perceived as very respectful. Bidders will also want to know the results of the selection criteria. It is perfectly okay to share these as this information is very helpful providing these bidders with feedback.
During the transition process it is important to meet promptly with your new broker and share files, data, claims information and any open or ongoing items so nothing falls through the cracks. Your new broker/company will want to get up to speed on your account as quickly as possible so they can properly represent you.
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