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Broker Value and Valuing Your Broker

Broker Value and Valuing Your Broker. Strima 2008 Allen F. Hyman Bickmore Risk Services. The Macro Perspective. 46 years experience with government As an employee 13 yrs. Parks, Recreation & Spec Facilities 13 yrs. Safety, Risk, Pool Administrator As a broker and consultant to government

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Broker Value and Valuing Your Broker

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  1. Broker Value and Valuing Your Broker Strima 2008 Allen F. Hyman Bickmore Risk Services

  2. The Macro Perspective • 46 years experience with government • As an employee • 13 yrs. Parks, Recreation & Spec Facilities • 13 yrs. Safety, Risk, Pool Administrator • As a broker and consultant to government • 20 years

  3. The Micro Perspective End User Account Executive Legal Broker Procurement Underwriter Constituents Wholesaler Competitors Specialty Professionals

  4. What is “Value Added?” • If you hired one person to place your insurance who provide no other services until the next renewal, there would be no “added value.”

  5. Where’s the Beef (Value) ? • Brokerage Organization Infrastructure • Market Knowledge/Leverage • Marketing Specifications • Collective Expertise/Placement Pros • Program/Policy review • Contract Review • Certificates • Technology • Specialty Professionals • Account Team • Claims Resources

  6. Zoom In • Benchmarking losses and costs • Industry knowledge • Tech resources • Actuarial review • 360 perspective for gapless program • Solution modeling and alternatives • Market clout • Terms conditions and policy analysis • RM consulting

  7. What is a Broker ? • Defining the “broker” and brokerage team • Broker • Agent • Client/ Account Executive • Placement Professional (s) • Client Service Representative (s) • Senior Relationship Manager • Industry Practice Specialists • Claims & Loss Prevention Specialists

  8. What are a Broker’s Objectives ? • Brokers want the best possible deal for the client related to terms, conditions and price. • Underwriters expect a negotiated solution with profitable pricing and a partnership. • Pricing and terms are always negotiable. • Application & historical data review are critically important.

  9. Broker’s Bidding Challenges • Obsolete documents • Boilerplates • Requirements (unreasonable?) Performance Bonds • Co-named on E&O • Cut and paste errors, redundancies and contradictions • Unnecessary/voluminous requirements • Poor data • Open claims • Commoditized purchase attitude • Buyer lacking necessary understanding • Time constraints • Insufficient opportunity for negotiations • Open market offerings • Unclear objectives/service expectations • What and who to include in the oral presentation • What is driving the award

  10. How are Brokers CompensatedDoes compensation drive deals? • Commissions • Used to be sufficient to cover all costs & profit • Where does commission come from? • Negotiated with underwriters • May still be in the clients best interest • Impossible to determine true net quote • Should be disclosed from all sources • Historically range from 5 - 25+% • Front end/back end issues

  11. How are Brokers CompensatedDoes compensation drive deals? • Fees • Client budget line item • Create internal issues in brokerages • Can generate skin and bones service • May lead to front end promises/ back end non-delivery • Fee/Commission offsets • Change in Scope of Services • Duration issues

  12. High Bidder versus Low Bidder WHY? WHY?

  13. Broker Behind the Scenes • Historical Perspective • Perception of Government Procurement • Pricing of Services Committees • Team brainstorms • Fee Models • Profitability/ Opportunity Cost • SWAGs • Size of the book • Service expectations • Dividing the pot • Competitive environment • Value Added • Internal preparation of proposals • Market relationships • Incumbent advantages • Many important questions are not asked in pre-bid meetings.

  14. When Price Drives…. • Insurance solution may be diluted • Services may be limited • Internal charges often affect services • Underwriters do not believe a relationship exists • For many reasons, underwriters want time with a insured

  15. When Service Drives • Bottom line does not steer the proposal • But it is factored in • Underwriters feel differently • Broker feels partnership is stronger • Client expectations need to be clear • Performance measures should be created

  16. Recommendations • Decide what you are buying? • Review the bid documents in advance of release. • Clarify drivers and priorities in the offering. • Take the time to create scope of services – even one year out. • Understand market conditions before bidding. • Create the best possible package of data. • Consider needs and desires of sellers. • Coach procurement well in advance of offering. • Demand disclosure. • Consider stronger relationships with all component players. • Making an RFP complex does not assure a better outcome. • Conceptual proposal vs. conceptual/creative section

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