Insurance Journal Forums

I think it was California, that I saw is one of the first to jump on the band wagon for legislation over the Marsh / contingency fee problem. CA is planning to make a "lowest quote must be offered" rule. Fines will be levied if the law isn't obeyed.

In my nineteen years in the business I always strived to give the lowest quote. But I will also say that there are some ircumstances that lowest quote is not always best .

Company A may have the lowest quote but their underwriting and claims paying slow. It is also hard to work with the company. So you don't quote them unless you really, really need to use them.

Company B has the next lowest rate (minimal price difference) but their underwriting is effecient, they pay claims promptly and it is easy to work with them.

So you give both quotes to the prospect and like a good consumer they go for the least premium. Are you to tell them about the problems that could avail themselves with company A? If you don't give them company A's quote you risk fines. Company B has their offer on the table in 5 days and you know that company A is always slower and won't have their offer for another week. Do you / must you sit and wait on company A? Will you need to send an inquiry to every company within the agency for a possible lowest offer?

In the life insurance business I know for a fact that certain companies are slow, slow, slow in their underwriting. For a difference of $10 less a year are you required to steer the clients to an insurance company that company that will take 7 weeks to underwrite? Will this rule roll over to life, health, etc?

How will the broker that uses a wholesaler know if he received the lowest premium?

I can hear the hungry E&O attorneys will be licking their tort filled chops. :rolleyes:

While that all concerns me, I think it is a much bigger problem we face.

If you tear apart the entire transaction we ultimately do work on behalf of the carriers. We depend on them to make us money and they in turn force us to meet their requirements. Without meeting these requirements we have no business!

So, you get many senarios from this such as:

a) You have a client who get a minimum premium quote of say $5,000 for example with Hartford and Safeco. Let's say that Hartford pays 15% and Safeco 10% for arguments sake. As I understand it we are supposed to choose the lower commission, all things being equal as this is considered right thing to do.

B) You have a loss ratio problem with Safeco and don't want to approach them for business at this time. However they would be the best deal. You are nervous to put this client their for fear of losing the market. This hurts both you and your other customers in that market. What do you do? Put them there for the benefit of one, or do you have a duty to protect ALL your clients and not put them there?

In effect the companies hold us responsible even though they underwrite and inspect most business we send them. So, is the whole idea of loss ratios and production to become a moot point? Obviously we want an incentive to put our business with who pays us the most. What do we do now, go open brokerage with every company? Why is it so bad to get paid extra for doing a better job than most? Insurance comapnies are for profit businesses. If they want to share that profit with us in in good years as an incentive, why not?

Why is this considered a kick back? Does this mean that any salesman who gets a bonus is getting a kickback? Wouldn't a stockholder dividend be a kickback? Or getting shares of a company as a bonus be a kickback?

Who is going to judge when you put them in the best available company? Should you recuse yourself from bidding because you may know of a better company that you don't have? That is to the benefit of the client to tell him isn't it?

This is a Clusterf*&^! The only way they can make it absolutley fair is to make all companies accept all business at the same commission structure on an open brokerage basis. Then the insured can pick who he likes knowing that he'll get 972 quotes to pick from and never get screwed.

Price controls, absurd laws, treat everyone the same....

Isn't that Communisim?

I'm in California and trying to keep an eye on the "lowest quote" situation.

The way I see it, at least in the commercial p&c arena, there are enough differences between company a and company b's forms, coverages, deductibles, etc that I would be able to argue just about any quote is the "lowest" quote given the exact forms, coverages, deductibles, company rating, etc offered.

Once again, another uneeded regulation. I offer my clients what, based on their needs, is the best policy at the best price. Sometimes that means the "lowest" price isn't the best. They rely on me as an insurance professional to evaluate their needs, search the marketplace, and make my recommendation for the best product for them. If I fail them, there are hundreds of other brokers ready to take their business and meet their needs.

And, if policy a or policy b meet their needs, and policy a pays me a little higher commission, or I need to place more business with company a to keep them happy, or company a is easier to deal with.... then that should be my decision to make based on what is best for my business and what is best for my clients.

Garamendi probably does not care about the quality of the company. Offer the lowest quote, even with a B- company, if it is cheaper than an A+ offering. You will exit the business much faster this way!

Robalfan

Being on the underwriter side of things, it is interesting to see feedback from brokers on this subject. I am curious as to what constitutes an appropriate due diligence / review of the client's available options.

Would a broker typically line up the quotes and offer some type of side-by-side comparison "matrix"?, including the broker's opinion (based on objective or subjective measures) about items such as:

"¢Coverage terms (subjective)

"¢Price "" both premium & commissions (objective)

"¢Financial security / Rating Agency comments about the carrier (objective)

"¢Admitted vs. Surplus Lines & availability of state financial guarantee fund backstop (objective)

"¢Carrier reputation for service such as claims, loss control, underwriting & historical commitment to a particular industry or line of business (subjective)

And after lining up these comparisons "" with appropriate disclosure of the commissions to be received from each carrier "" let the client make an informed decision (and either accept or reject the broker's recommendation)?

It would seem to me to be simply a matter of adequate disclosure? This also seems to make the "lowest price" issue moot - since cost / benefit for any market or product is always rated on a continuum?

Thanks for the insights.