How to Discourage Commercial Insureds From Shopping Their Account

Virtually every business owner or manager considers shopping their business insurance account at one time or another. In many instances, it is a transitory thought. But in today’s world, where commercial premiums have plunged and the economy is struggling, seeking a competitive quote is more than a notion; it’s a financial imperative. If you are the incumbent agency, the odds are in your favor to retain the account. But as any Vegas dealer knows, the house sometimes loses. So, to make this move less appealing to shopping-minded clients, present them with some dollar-based realities to reduce their drive to depart.

Renewal Anxiety

When a client reveals that they like you (the producer), the agency, and their carrier, but they still want to shop their account to test the market, it’s something that grabs your attention. You start looking for extra ways to reduce the renewal premium and to pump up the value of the services that you provide. But sometimes there just aren’t enough classifications and credits in the manual. So, if you could just convince your insured that the companion acts of shopping for and buying new insurance will prove to be counterproductive, you’ll save everyone involved time and money. To make this point, you’ll need to clearly demonstrate that moving their business account is not a zero-cost transaction. It’s expensive. And the total expenses involved may actually exceed any perceived dollar savings. Here’s a simple numbers-driven way to effectively make this point.

Run the Numbers

Gather together the many costs associated with shopping and ultimately moving a typical business insurance account. Key them into a spreadsheet. Start by placing a dollar value on every potential hour invested by your insured during the shopping process. These hours add up fast, especially if there is more than one person involved and there are multiple agents providing new quotes.

Time consuming examples of a client’s pre-move activities involve identifying new sources for insurance, interviewing potential replacement agents, establishing quote rules, setting bid specifications, signing broker of record letters, authorizing loss-runs and other reports, providing financials, sitting through fact-finding meetings, and enduring engineering inspections. Additional time killers include trading e-mails and phone calls, sitting through multiple proposal presentations, evaluating each proposal, and making the final decision. If a buying committee is charged with making this ultimate selection, the hours can really add up.

Post-move activities center mainly on changing an insured’s internal procedures, including adjusting to a new billing structure, retraining the staff, physically replacing insurance posters and ID cards, ordering new certificates of insurance, and more. Each of these individual actions incurs at least some investment of time.

Multiply the pre-move and post-move hours that you have projected and multiply them times the value of each hour of your insured’s time (at least $50 to $75). Conclude your arithmetic by adding in the tangibles (postage, express delivery, CPA and consulting fees, etc.) plus any intangibles (net opportunity costs, potentially reduced insurance protection, and a damaged business relationship with you and your carrier) — and the true cost of the insured’s transfer becomes startlingly clear.

Use the Numbers

The resulting projected dollar amount can be shocking, especially to someone who never really thought about the ramifications of shopping. Employ your calculated total to expose the fact that moving their account might actually cost them money. Further suggest that your insured add this number to any replacement quotes proposed by a competitor. Importantly, the shopper can’t effectively argue that the total tally is simply a one-time transfer cost, because rates aren’t guaranteed from year-to-year. After all, your next renewal offer could decline while your rival’s might rise.

The ideal way to use your transfer cost spreadsheet is to sit down with the insured and go over it, item-by-item. Some activities may need to be added, while others are deleted. Plus, some of the hours that you estimated may need modification. When you work openly with your client, they’ll see that your cost estimates weren’t exaggerated — and perhaps conclude that moving their account isn’t such a hot idea after all.