Have you ever made a little mistake that ended up having lasting consequences?
I can remember a time that my son was mowing our lawn. Needing more fuel, he drove the tractor back to the barn to fill it up. On autopilot, he grabbed the red gas can and filled the tank.
The problem was that our tractor has a diesel engine. Having always used our gas-powered mower in the past, he naturally grabbed the red can.
Kind of a small mistake. He simply did what he had always done.
But, without quick resolution, this small mistake could have had significant consequences-like paying for a new engine in our John Deere.
As a long-term insurance agent, I have seen business owners and leaders unwittingly make mistakes when quoting their commercial insurance packages.
And these mistakes have had lasting consequences like:
- Burning bridges with insurance companies
- Paying more for their insurance than they should pay
- Never getting to the heart of the issues that really drive your escalating rates
- Going with the lower price only to find there was a coverage gap…after it is too late
Oftentimes, insurance agents won’t tell you that you’re making a mistake. In an effort to keep your business, they will let you “reach for the wrong gas can.”
So, what are these mistakes? What are the top mistakes businesses make regarding their commercial insurance? The answers will probably surprise you.
- Repeatedly requesting a quote, but never actually purchasing
- Going to market without addressing your risk/insurance issues first.
- Working with a mediocre agent.
- Not considering a long-term arrangement with the insurance company
- Treating your insurance company (or agent) as a commodity, not a partner.
So let’s take a closer look, just to be sure you’re not making these mistakes.
1. Repeatedly requesting a quote, but never actually purchasing
Many business owners think that it’s a good idea to “quote out” their insurance every year. So, they ask their agent to apply to several companies on their behalf.
And year after year, their agent applies to the various companies to see what rates each company will offer. All of this effort ends with the same result. The business ends up writing its policy with its current insurance company after beating them up on price.
What many business owners don’t know is the amount of time it takes for an insurance company to compile information and prepare a quote.
Preparing your quote
Depending on the complexity of your insurance needs, it can take an insurance company weeks to months to get your quote ready.
You can expect each insurance company to review:
- Past losses
- Safety practices
- Motor vehicle records
- HR practices like hiring, drug testing, and workplace injury protocol
- Building occupancy
- Type of construction
- Scope of operations
- Financial records
- Risk transfer processes
- Employee morale
- Worksite inspections
- Companies you do work for
- Type of work your business engages in
- Premium amounts
- Website / social media review
- As well as several industry-specific factors
With so many aspects to consider, an insurance company invests incredible amounts of time and resources on each application.
Insurance company fatigue
If year after year, an insurance company goes through the rigorous process of providing you with a quote only to be rejected, you can expect that company to become fatigued.
It often comes to the place that the insurance company does not seriously consider your application. And the company will certainly not provide you with their best rates.
Insurance companies don’t want to waste a lot of time doing all the work for a quote that they have no hope of winning.
The insurance company may even ask questions like “Why is this company going to market? Do they just want quotes? Are they likely to switch companies or agents? How many agents are quoting?”
These companies also don’t want to waste time with applications from an agent that is not likely to place business with it.
Repeatedly asking an insurance company to quote your policy and consistently rejecting those quotes is detrimental to you. You will find that insurance companies don’t want to work with you and that they aren’t going to give you their best pricing.
2. Going to market without addressing your insurance issues first.
Another mistake that businesses make when quoting out their insurance is applying to insurance companies before addressing the root factors that have led to high insurance premiums.
Many times businesses are desperate for lower premium rates because their current rates have become so high!
Typically, there are reasons that insurance premiums go up – repeated workplace injuries, multiple insurance claims each year, change in industry or level of hazard, etc.
Before asking insurance companies to quote your policy, it is best to address any underlying issues that have caused your insurance premiums to rise.
Generally, we are most effective when we come in at least six months prior to quoting. That is often when it is best to proactively address your insurance, safety and risk management issues.
Establishing a plan
Insurance companies show more favorable pricing to businesses that are taking an active role in reducing insurance claims.
For example, we work with many businesses to implement some of our unique best practices before going to market. We help them improve hiring procedures, safety protocols, claims procedures, and transferring risk to subcontractors or tenants.
Our clients who have used our custom approach to the areas above have seen these types of practices help dramatically reduce claims.
By having a proven plan in place before going to market, you can expect far better results with insurance companies.
Don’t be fooled though. These practices take time to implement. They will not result in large premium decreases instantly.
But, they will lead to long-term savings.
And, they will also create a better relationship with your insurance company.
When you take your insurance needs to market before addressing your issues, you should know that insurance companies can have a long memory!
Making a good impression at the beginning will help you in years to come!
In that same vein, making a bad impression in the insurance marketplace can have negative results for years to come!
Insurance companies can have long memories. Remember they scrutinize your business before issuing a quote. They have in-depth knowledge about your business, your past insurance history, and your safety record.
If you’ve had some claims or safety issues, having a plan in place and working on that plan can really improve your results in the insurance marketplace. The insurance company will get the message that you are willing to take an active role in reducing claims and controlling your costs.
Insurance companies want to partner with their customers. And they want to know you will be an active partner.
3. Working with a mediocre agent.
The third problem businesses make is working with a mediocre agent.
“But,” you might say, “how can I tell if my agent is mediocre?”
This is a great question and the crux of the problem.
Most businesses don’t have enough insurance expertise to objectively assess their current agent. They rely on their gut instinct or their overall impressions.
But what if your impressions are wrong?
I often hear prospective clients say things like, “My agent is a really good guy. We like working with him.” Or, “I’ve been with my agent a long time. We’ve been happy with his service.”
While having a well-meaning agent with a warm personality is nice, it’s not the best evaluation tool for determining the level of service they are giving you.
So what are some signs that your insurance agent is not merely mediocre, but is heads above the rest?
Excellent service and resources
An exceptional insurance agent should be offering you more than an annual quote. Your agent should help you:
Regularly claim review and help managing your claims
This is a common area where mediocre insurance agents do a poor job. One important practice to reduce insurance costs is actively managing your claims.
Your insurance agent should help you do this. Your agent should make sure that your claims are not costing you more than they should.
For instance, there are times when an insurance claim remains open with the insurance company but actually should be closed.
Claims adjusters are incredibly busy and often swamped with their work. There are occasions when a claim doesn’t get closed as quickly as it should.
And if a claim is open, the insurance company will treat it as though it has been fully paid out to the maximum amount they anticipated paying for the claim. And the higher the claim, the more it will impact your insurance premiums.
This is just one way claims impact your insurance outcomes. Your agent should regularly review your claims with you.
Provide resources to reduce your risk of large claims
Almost all agents will tell you that they have resources available to help you improve your insurance costs by mitigating claims. But do they?
The best insurance agents will have practical tools to help you that directly and indirectly impact your insurance costs.
These resources might include help with:
- Improving your employee manual
- Developing drug testing protocol
- Establishing a physician panel
- Organizing an effective safety committee
- Employee cybersecurity training
- Instituting a return to work program
- Providing tools to evaluate your contracts from an insurance perspective
- Developing fleet/driver risk management tools
- Just to name a few
If your agent can not give you a comprehensive list of practical resources to help you improve your insurance outcomes, you are likely getting mediocre service.
And while some agents don’t provide these services themselves, they should at least have a partnership with a third-party company that can come in and help you establish good practices to improve your insurance outcomes.
Place risk appropriately
Many businesses don’t realize that they may be using their insurance policy to cover another business or entity. This typically happens if your business is working with a subcontractor or an outside vendor. It may also be the case if your business has a tenant that utilizes your space.
In these kinds of relationships, it is pertinent that you make sure those other parties have the insurance coverage they need. This ensures that you won’t be paying for a claim that they didn’t have coverage for.
Here’s an example of how this might happen. Let’s say that you hire a painter to freshen up the interior of your office building.
One evening when he is working, he falls coming down the ladder and breaks his ankle. Who is responsible to cover that claim? Should that be added to your workers compensation policy?
Your agent should make sure that anyone who works for you or with you but is not on your payroll has adequate insurance coverage. Your agent should provide you with resources to ensure you have the proper paperwork that indicates your subcontractor or vendor is working under their own policy.
Review your current coverages and exposures
How thoroughly is your agent in reviewing your coverages and exposures? Does your agent do a deep dive into your current policy each year? Do they make sure that what you purchased last year aligns with your current needs?
Inevitably, businesses often have changes in their needs. Along with that, insurance companies often have new products or changes in their existing products.
Your agent should be dissecting your policy to make sure you have the coverages you need and that your business is not needlessly exposed to a large uncovered claim.
Assess your risk tolerance
Your agent should ask you questions to determine how much risk your company is willing to take. They should not assume that you want the insurance company to cover all of your risk. And this is the easiest route for your insurance agent to take when writing your policy.
When an insurance company assumes a greater amount of risk for your company, your insurance policy will be more expensive.
Your insurance agent should help you weigh how you want to manage potential claims.
- Do you want the insurance company to pay for the entire claim, or do you want to pay for some of the claim?
- Are there some potential claims that you don’t want the insurance company to cover at all?
- Would you rather pay a higher deductible for a lower premium? This would mean you’re willing to risk paying a higher amount if something happens, before the insurance company kicks in its portion.
These are some of the questions your insurance agent should be asking you to determine your “risk tolerance.”
If your agent is not engaging with you in more ways than simply quoting your policy, you aren’t getting exceptional service.
Paying your agent
Another consideration you should look at when evaluating your insurance agent is what they are being paid.
While rate increases are negative for you, rate increases actually increase the amount that your agent is paid. Your insurance agent is paid a percentage of your premium.
Now, because of inflation and variances in the insurance market, rate increases are not unusual.
But, when you receive an increase, your agent should set to work helping you lower your costs. If he says there isn’t anything you can do to lower or contain your long-term insurance costs, he is either not equipped or not motivated to help you establish a cost-effective insurance program.
If your agent doesn’t seem too concerned about your rate increases, you should look for another agent.
Other signs your agent is mediocre
A few other signs that your agent is mediocre include the following:
They only take hours to quote your insurance.
As noted above, insurance is complicated and preparing an application should take a significant amount of time. If your agent can turn around in a few hours with a quote prepared, you should have some concerns.
They quickly send apps to the insurance company on your behalf.
Your insurance agent is responsible to represent you well to insurance companies. If an agent applies quickly on your behalf, this should be a red flag.
An exceptional insurance agent will labor over your application to ensure that you are represented in the best light to various insurance companies. To do that effectively, they need to spend time addressing the areas mentioned above to make sure they understand your whole risk profile.
Also, insurance agents who quickly apply often do so to “block” the insurance market. This means that no other agents can apply on your behalf to those insurance companies for a full year. This can be a real problem with commercial insurance.
Your agent is willing to waste your time and the insurance companies time.
If your agent is willing to apply every year to loads of insurance companies on your behalf, they probably have time to waste. And this is also a sign that they are willing to waste the insurance company’s time.
Your agent knows before they apply which insurance companies are warm to businesses in your industry. If they apply to companies they know won’t be interested in your writing your insurance, they are just wasting time.
Your agent should be able to tell you which companies are likely to give you the best rates.
4. Not considering a long-term arrangement with the insurance company.
Many businesses don’t realize that insurance companies are willing to engage in a longer-term commitment. In fact, if you are willing to commit to a multi-year contract, many insurance companies will be more aggressive in their pricing.
When you agree to a longer-term commitment, you agree to lock in rates for up to three years. This is a great option if you don’t want to go to market for your insurance every year.
Some insurance companies like this arrangement because they know you are committed to them for a period of years.
You are not bound to this arrangement if circumstances change.
Remember, obtaining a proposal for your insurance program takes a lot of time for an insurance company. If you are willing to lock in your rates for multiple years, many insurance companies will reward that decision with more competitive rates.
5. Treating your insurance company as a commodity, not a partner.
Nobody likes to be viewed as a commodity-including insurance companies.
When you partner with your insurance company, you will find the company is willing to go the extra mile for you. They will provide extra resources to help you control your insurance costs and give you better pricing. They will be responsive in processing claims.
When you partner with your insurance company, they become your advocate. Insurance companies generally want to see their clients succeed.
Pricing your package
What many insurance agents won’t tell you, though, is that if you are only looking for a price and not a partnership, the insurance company is apt to price your package differently. They won’t add as many resources to your package.
I have also seen a difference in the way insurance companies have handled claims for their clients who have partnered with them – clients who have valued this important relationship.
In an ideal situation, your insurance company wants to come alongside your business and help you control your losses. They want the opportunity to be part of your team.
Through this relationship, you can benefit from loss control resources like safety training, DOT driver monitoring, site inspections, DOT support, safety committee assistance, HR and legal advice, risk transfer resources, and cyber resources.
Your insurance company doesn’t want to “be in your business.” Genuinely, they want to partner with you to help you control your costs. Insurance companies want to help you keep your claims and premiums low.
How do you view your insurance company? Are they your advocate? Or do you see them as a pain in the rear?
Your attitude toward your insurance company will have significant implications.
We’re guilty! We’ve made some of these mistakes. What now?
Don’t worry! Making mistakes in the past doesn’t mean you’re doomed to less than the best outcome when it comes to your insurance.
Trust me. I’ve seen many companies who have a history of approaching their insurance program in the ways I’ve described above. And with some effort, those companies have been able to turn their insurance program around.
Let me share with you the three biggest secrets to turning your insurance program around.
1. Choose your insurance agent wisely.
The first and most important step you can take is making sure your insurance agent is willing and able to help you manage your risk and your insurance program. Mediocre agents are the kiss of death when it comes to improving your insurance outcomes.
If you don’t have the confidence to determine that you have an exceptional agent, we have tools that can help you assess your agent.
2. Accept the help your insurance company is eager to give you.
Remember, many insurance companies don’t just want to be in your business. They have a vested interest in helping you keep your insurance costs low.
When your insurance company makes cost-effective recommendations, be sure to implement them. If you are struggling with implementation, ask your agent for help. Your insurance company and agent should be available and enthusiastic about helping you succeed.
3. Don’t rush to market for a bunch of quotes to try and reduce your rates.
This may seem like the most counterintuitive advice I could possibly give. But, going to market before you’re ready and without addressing the factors that are driving your costs will likely lead to a disappointing long-term outcome.
In fact, going to market without being ready or selective can often end with results that are polar opposite to your desires. Often this ends with insurance companies not being sympathetic to your cause and unwilling to work with you.
Working with Baily Insurance
Our insurance agency doesn’t approach insurance in the traditional way. We are dedicated to addressing the factors that drive your insurance costs.
Like a physician trying to find the root causes of an illness, our team works to determine what your business can do to address any underlying causes resulting in premium increases.
Our team is also non-traditional in that we have ZERO interest in disrupting a good and effective agent-client relationship.
We have even partnered with businesses in a consulting role to help them manage their insurance processes, evaluate their insurance program, and help them through the quoting process–all while the business maintained their relationship with their current agent.
So what sets our agency apart?
Our team is truly excited about insurance! We have incredible resources at our disposal that can help most businesses improve their insurance outcomes–and nothing excites us more!
And we err on the side of transparency and education. With Baily Insurance, we want to make sure you know exactly what you are buying and how we are being paid.
Doing insurance well is our passion! Making sure you have the protection you need at the best price possible is our commitment.
If you would like a third party to examine your current insurance program, our team offers a free 15-30 minute consultation to discuss your current program to quickly identify if there are any glaring issues that you need to resolve.
You can schedule an appointment today to make sure you’re getting the coverage and service you’re paying for.
We also offer this free service for group health/employee benefits.