INSURANCE BASICS & MARKETING TIPS BOB CHARLESWORTH, ARM, ALCM, AIS CHARLESWORTH & ASSOCIATES, L.C. P.O. BOX 23588 OVERLAND PARK, KANSAS 66283 (913) 851-4730
Are you sometimes the target of the insurance industry’s “sales” force?
UNDERSTANDING THE PLAYERS • INSURER (company to assume the risk in exchange for a premium) • CAPTIVE/TRUST (usually waives any “bidding” requirements for future years) • BROKER (represents the client) • AGENT (represents the insurer) • MANAGING GENERAL AGENT or MANAGING GENERAL UNDERWRITER (MGA or MGU) • DIRECT vs. BROKER (possible in Benefits)
HOW PAID • COMMISSIONS (built into the rates) • Some health insurers quote same with/without broker • P&C typically pay 10%; Specialty Lines 15% • Benefit pays a sliding scale – Health usually average 2% but fully negotiable on larger groups. • CONTINGENCIES / OVER-RIDES / ADMINISTRATIVE FEES • Full Disclosure (some a flat person per year; Est. 1% to 2% on average) • INSURANCE “NET” PLUS NEGOTIATED SERVICE FEE (Contractual usually) • Find best to run about 3 months prior to policy year. • With limited markets, sometimes the best alternative. • Can save some money vs. commissions for larger clients. • Some negotiate service but agree on commission amount to avoid having a separate professional budget fee.
The more info provided in the specs, the better Use information from a prior year’s application Send back “blank” applications Watch release of names (for census, claims and/or drivers info) Property Schedules & values Specific date for inspections Specific date for last questions Break down information by area of risk Budget data found on web-site UNDERWRITING INFORMATION
PROPOSALS • Provide a comprehensive proposal format for completion that outlines coverage and condition comparisons (this way they know how the proposal will be compared) • Establish an evaluation committee and criteria for rating. • Watch the value of ratings for “cost” – you aren’t buying paper. • Negotiations & Clarifications AFTER receipt of proposals – not a price war.
COMMON PITFALLS • Multiple quotes from one broker • Same insurer quotes through multiple brokers (not necessarily the same price) • Time restraints (need 45 to 60 days in the insurance marketplace) • Pricing – weight of the decision process • Local vs. National broker • Insurers with exclusive broker representation • Underwriting Information – how distributed
COMMMON PITFALLS (Continued) • Association Trusts vs. Insurer • Bidding too often (3-year cycle acceptable) • Advertising & Market Selection • Ask for insurer requests and if direct or brokered. • Amount of public business with this insurer • Participation with PRIMA or other risk management seminar programs • Who “flips a coin”? • First come, first serve (some insurers is first in with most complete submission) • Stand firm in excluding brokers that lock up markets prior to assignment or during the process. LET’S LOOK AT SOME SAMPLES
60 Point Questions 30 Point Questions 10 Point Questions Outstanding 45 – 60 25 – 30 9 – 10 Exceeds Acceptable 31 – 44 19 – 24 7 – 8 Acceptable 21 – 30 13 – 18 5 – 6 Marginal 0 – 20 0 – 12 0 – 4 Evaluation Criteria Maximum Points Score 1 FULL QUESTIONS OUTLINED IN FORM #1 Governmental Entity Experience §Missouri governmental entity references. §Insurers your firm would like to be assigned. §Experience and volume of business with these insurers. ·Organizations which your office directly participates regarding governmental risk management. 60 ______ 2 Agency Services §Service team assigned to the City’s account. §Communicate changes in the status of clients’ insurers. §“Fee for service” ability. §Objective reasons to be appointed insurers requested. 30 ______ 3. Agency Information ·Location where City’s account will be handled. ·Size of your firm. ·Years in Business at the location handling the City’s account. ·Web-site availability. ·Commercial insurance business vs. Personal. ·Total Property & Casualty premium placed. 10 ______ MARKET ASSIGNMENT RANKING SHEET – SAMPLE SCORING RANGES
50 Point Questions 30 Point Questions 20 Point Questions Outstanding 43 – 50 25 – 30 17 – 20 Exceeds Acceptable 33 – 42 19 – 24 13 – 16 Acceptable 21– 32 13 – 18 9 – 12 Marginal 0 – 20 0 – 12 0 – 8 Evaluation Criteria Maximum Points Score 1 PROPOSED POLICY COVERAGE 1.1Comparable to current coverage provisions 1.2Broad coverage's and limits 1.3Multiple lines through one insurer 1.4Insurer services, including claims administration. 1.5Loss control services by insurer 1.6Legal representation on claims 1.7Claim investigation services 1.8Run-In from current Claims Made program 50 ______ 2 PROPOSED POLICY CONDITIONS, LIMITATIONS AND EXCLUSIONS 2.1 Deductible and Retention options and functionality 2.2 Applicable Exclusions and Impact on Plan 2.3Supplemental Coverage Limitations 30 ______ 3 PROPOSED POLICY COSTS AND AVAILABLE OPTIONS 3.1Cost per line of coverage 3.2Availability of each coverage section either collective or severally 3.3Rates utilized and rate guarantees 20 ______ PROPOSAL RANKING SHEET SAMPLE
Employee Health Task Force (it’s advisory!) Cost vs. coverage and provider networks Contribution methods – critical Can have a huge impact on pricing Watch enrollment minimums from some insurers Number of plans from same or different insurers Adverse Selection concerns & pricing issues 1st Year Pricing! (10%+ price reduction) Multiple Year Rates \ Rare on health; common on Life and LTD Many offer % maximum on specific loss ratios (watch the definition of loss ratio – paid or incurred HEALTH BENEFIT ISSUES
HEALTH BENEFIT ISSUES (Continued) • Obtain rating formula for subsequent years for pricing calculations • Broker vs. Direct • Timeline for bidding – some states require every 3 years; difficult to change due to enrollment issues