Study Notes 4 – Refining the Sales and Marketing Process
APPROACHING CLIENTS
Every client is unique. They may be similar in class of business however, there will be variations between them depending on their size, location, the complexity of the business and the processes they use to manufacture their products or in the way in which they perform the services they offer.
Because of the variation among clients, there can be no set formula to contact and market to clients.
Two factors are used:
- what does the client want
- how much client contact do you need to be effective.
When making your first assessment of the risk, decide whether the size of the account will justify the amount of time and attention it will require.
For smaller accounts, phone conversations might provide sufficient information. Mid or moderately sized complex accounts may require several face-to-face meetings. Very large and complex accounts may require a number of on-site visits.
Broker of Record Letter
Directs the insurer to deal with you on the particular clients account and states that you will thereafter be paid the commission on the account.
The underwriter will not accept this letter without first contacting the original broker to give them an opportunity to retain the business.
Commission is earned by the existing broker at the time the business was originally placed. If you take over the account mid-term, you will be expected to provide broker services with virtually no income until next renewal and you will be liable for the amount of any outstanding premiums without being paid any commission on them.
THE PROCESS
Risk Analysis
The analysis of business risks uncovers weaknesses and exposures.
It helps determine which perils may cause a loss; what property is exposed to the loss and what the financial impact will be.
To perform this analysis, you require access to information.
When discussing the risk with the client, make sure you’re speaking with the appropriate person in regards to gathering the information.
It may be more productive to speak with a manager or accountant than the president. The size and scope of the operation will influence who should be your contact.
Privacy Concerns
PIPEDA – The Personal Information Protection and Electronic Documents Act.
The process of writing a new account may be affected by outside elements such as privacy laws that govern the use of personal information, consent requirements and how personal information may be disclosed to third parties.
It may also be necessary to obtain employees consent to obtain certain reports (MVR; Credit reports)
Reassure your clients that information will be used only for the purposes they authorize and will be kept strictly confidential.
Obtain their written confirmation of their permission to proceed either by way of their signature on the application or by such other standard format your office would utilize.
Similarities
General information that will apply to any risk includes:
- details of the physical risk, occupancy and processes
- values at risk
- minimum of 5 years loss history
- lists of equipment and vehicles to be insured
- liability rating information (payroll; sales figures)
- signed application and questionnaires where required. (auto; D&O; crime; insurer specific)
Investigating Risk Exposures
Look at the business with an entrepreneurial mind – examine it as if you were setting up the business yourself.
Take into account the aspects already discussed (risk retention; transfer; loss control)
Consider:
- how is the business organized – single or multiple corporations; single ownership
- are all operations and property at a single location; multiple locations; premises of others
- is the business dependent on one major customer or supplier
When your investigation of a risk includes a survey of the premises, ideally you’ll be in the presence of the owner; plant manager; or foreman who can answer your questions.
Consider the following factors:
Property: are building services suitable for type of occupancy. Is design/size of building suited to occupancy. Does housekeeping reflect attention to loss control
Business Interruption: how is production organized. Any places in the production that could cause an interruption of the processes
Crime: Investigate the presence of special protective devices such as alarm systems, locks, bars on windows and doors, external hinge protection, class of safe and the presence of watchmen.
Liability: Determining the business’s exposures to loss as well as the owner’s perception of the greatest exposure will not only assist you in recommending an insurance program and protect you from E&O claims, it will also enable you to direct your sales effort to secure the account.
Clients are very receptive when you show them how the insurance program you’re proposing will answer their specific questions.
Automobile: Confirm all vehicles to be insured have actually been included on the policy.
Focus on types of vehicles used, distance traveled, use of vehicles and number and experience of drivers. Ask if there is a safety program in place and if driver’s records are tracked through MVR’s.
Risk Retention: If the client chooses to retain certain exposures, confirm they are aware of any ramifications of their decision. Small claims can escalate quite rapidly, particularly liability claims.
Recommend the client report all losses even self-insured ones to ensure the client is in compliance with reporting requirements
SELECTING APPROPRIATE INSURANCE
Selecting Insurance Wordings
The choice of policy forms is affected by the client’s exposures and also by the variations that exist between the individual insurers version of commonly used wordings.
While your preliminary reaction might be to routinely recommend the broadest form of property insurance available to your client, it may not automatically be the best option for the client nor the one they want to purchase.
Because of the differences between wordings offered by various insurers, comparisons of quotes can be a challenge. To avoid misunderstandings when discussing coverage, refer to the actual policy wording in use in each case.
When reviewing quotes, review each policy’s definition, exclusions, extensions, limitations and conditions in order to ensure that you’re comparing like with like and that you’re providing the protection the client needs.
Relevant clauses may be in more than one part of a wording making it necessary to review the exclusions and definitions to determine the extent of coverage.
Many terms are used inconsistently in the insurance industry. What one insurer calls a wording, another may call a rider, and another may call a floater – all of them describing basically the same thing.
Insurers can differ in the ways they provide the same insurance. What one insurer includes as an extension to an existing wording, another will insist it be insured on a separate floater or rider.
Insurers can amend their standard wordings at any time – remember to read the wording to confirm its scope.
If the clients existing insurance program includes a manuscript wording, review to establish the scope of protection provided. Determine if it is really necessary to request a custom wording.
One insurers manuscript wording can be a standard part of another insurers shelf wording and the second insurers wording may be even broader than the first manuscripted one.
Changing market conditions often lead to changes in policy wordings. In hard market conditions with less competition between insurers, wordings tend to be restrictive.
In soft market conditions where competition is more intense, the environment is conducive to customization through exclusions, extensions or manuscript wordings.
THE INSURANCE MARKET
Be aware of what insurance products are available in the market, not just coverages offered by the insurers you deal with.
Courts have held brokers responsible for uninsured losses where the broker incorrectly advised the client that insurance was unavailable.
Marketing
Whatever market cycle prevails, developing a good working relationship with your underwriters will facilitate writing business with them.
If you know and use the submission format your underwriter prefers, the more likely you’ll be successful in obtaining a prompt response.
Underwriters will most likely respond quickly when the information presented is clear, concise, easily read and understood.
Likewise, sending your underwriter the type of business they want to write will also improve your success rate.
If you simply send a complete proposal for any give risk to all the insurers in a shotgun approach, your reputation with your underwriters and their interest in you will disappear.
Occasionally, it can be helpful for the producer and client meet with the potential underwriter. This would generally only happen on very large and most complex accounts. Such meetings would only be beneficial if all parties are interested in working together toward the common goal of placing the insurance with that insurer.
When you’re one of several brokers a client has contacted to provide a quotation, a broker assignment letter or letter of authority may be preferred by the client to ease the submission procedure. This letter may assign specific insurers to specific brokers or ask insurers to quote to all broker the client has contacted (less likely)
Most insurance companies require that a broker assignment letter be:
- on the client’s letterhead
- currently dated
- specifically addressed to the insurance company – not a general letter of authority.
Note that the assignment letter appointed to you does not obligate the client to purchase insurance from you nor does it transfer the account to your brokerage.
Generally the first submission received by an insurer blocks that insurer from dealing with other brokers on the same risk. Sometimes brokers like to take advantage of this principle to stop other brokers from approaching insurers. This type of aggressive marketing can enable a broker with access to lots of insurers to tie up a significant portion of the marketplace.
Not all insurers honour the first-in principle – some will quote the risk to all brokers regardless – being careful to quote exactly the same terms and conditions to all.
A broker assignment letter is intended to address these problems by clarifying the clients intent to all parties.
Insurer Response
The insurer could quote only part of the risk; ask for more information; decline to quote; or you may have to remind the underwriter that you want the quote.
Sometimes you obtain a quote for only part of the risk (due to size, your underwriter is unable to write 100%; insurers only write some of the lines of coverage you require)
Where you’ve had to place coverages with more than one insurer, review both wordings carefully to determine if there are any uninsured exposures or exposures are insured in whole or in part with both insurers. If it’s not clear, at the time of loss, which coverage applies can delay settlement while multiple insurers try to figure out which one provides primary coverage.
If the underwriter has asked for more information, ask if underwriter if the client’s answer will result in subsequent questions – clarify the extent of the query.
Abeyance
When you submit a risk for quotation, you also set a date to follow up if you’ve not heard back from the underwriter. If you’ve been realistic about your abeyance date, you’re more likely to receive a response within the given time frame allowing you prioritize your time more effectively.
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