The Importance of Strategic Relationships for Binding Insurance Applications

Recently, we encountered a situation that underscored the critical importance of understanding and managing strategic relationships in commercial insurance.

Here’s what unfolded:

The Scenario

A senior living operator with eight properties insured through our brokerage approached their agent to add two additional properties to their policy. The agent’s account manager mistakenly sent the app to a different broker first, before sending it to us.

So far so good. Competition is healthy and we have no problems with it.

However, that broker immediately sent the app to every market they could identify, more-or-less in a bulk mail out, to lock every other broker out of the deal.

The app landed on the desk of an underwriter at the preferred market, who was unfamiliar with the risk or the fact that they already covered other properties for that client. The risk was rejected, purely on an assessment of the information provided.

When the account manager then approached us to submit the properties to the same carrier, it was too late. Even when the original broker released that market, the app had been rejected in their system and could not be revived.

The result is a lose-lose for everybody involved.

1. The client now has two separate insurance policies and is paying a higher rate to cover the additional properties. Needless to say, they are unhappy.
2. The agent now has an unhappy client who will probably approach other agents when the time comes to renew their policy.
3. The original broker managed to score a short-term win, but it’s very unlikely that the client will continue with this arrangement when it is time to renew the policy.

This incident highlights the importance of the relationships that brokers build with underwriters. Knowing their appetites and what they will consider is paramount when it comes to submitting applications. While spamming every market to lock out competitors may seem a clever strategy, it often backfires, bringing disastrous results.

While competition is healthy, agents need to know the markets each broker has relationships with and this information must be conveyed to the account manager.

Nobody likes their time wasted, least of all the underwriters who have to go through a pile of these apps every day. The strategy of spamming them to cut out competition only leads to a poor relationship with underwriters and a bigger chance of them rejecting future applications from the spammer.

Here are some important strategies for agents and brokers to develop strategic relationships that will benefit them:

Strategies for the agent

1. Take the time to communicate the client’s needs to account managers, so they do not make the mistake of allowing one broker to spam carriers and block out competition. Account managers should know the brokers they work with better than anybody else in the organization, but unless the client’s needs are properly communicated to them, mistakes can happen.
2. To strive to gain a better understanding of the brokers you work with and which carriers they have built relationships with. It’s in an agent’s interest to work with more than one broker, so that you have a better chance of sourcing the most suitable coverage for your client at the best price. But you must know which carriers each broker has a relationship with.

Strategies for the broker

1. Take the time to build relationships with underwriters. Understand the appetites of their carriers and the exceptions. This is time well spent as it will result in better deals for agents and their clients. It will also result in fast approvals and fewer rejections.
2. Resist the temptation to blanket every underwriter with a standard app to block out competition. Underwriters do not appreciate their time being wasted, so they will probably put your future applications at the bottom of the pile and you’ll struggle to bind anything. It results in short term wins and long term losses.

For an insight into Westwood’s process of understanding our underwriters, take a look at one of our Carrier Interviews, below. You’ll find more of these on our Insurance Insider website.

At the end of the day, lasting relationships generate our bread-and-butter and those relationships depend on us finding the best deal we can for our clients. By implementing these simple strategies, we can all enjoy long-term wins and lasting success.