Broker Value and Valuing Your Broker Strima 2008



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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
      • 20 years




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.”



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



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



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


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.



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



How are Brokers Compensated Does 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


How are Brokers Compensated Does 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


High Bidder versus Low Bidder



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.



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


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


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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