It happened again this week. An insured trying to find insurance for a relatively small ($11 million in value) mixed-use commercial building on the Florida coast. He asked two different insurance agents to help him find insurance. This kind of risk is definitely going to be placed in the excess and surplus insurance market requiring a wholesale broker to assist them. Each agent sends the risk information to their favorite wholesale broker who types up a submission letter and sends it out to the insurance carriers who will most likely be interested in writing their insurance. There are probably only five or six insurance carriers who would have an interest in writing this particular risk, and both brokers approached all of them.
So, what happened to this risk when the insurance carriers got it from two different brokers? The broker that sent it first will be 'clear' and can work with the carrier to negotiate terms. The broker that sent it in second will be 'blocked' by the first broker and receive a declination letter.
Only one broker can work with one insurance carrier at any time.
In an uncontrolled insurance placement like this, the wholesaler or agent that gets out to the market the fastest can get to the carriers first and be able to secure quotes. What is ironic about this is the fact that a wholesaler who spends time with the submission to make sure it is of the highest quality and a 'top-of-the-stack' submission will actually get penalized and blocked out of markets by the wholesaler that just 'hits forward' on his email to the carriers. This will be a post for another time.
So our building on the beach was quoted by a couple of insurance carriers with rate increases to what the insured was paying last year (the market is now hardening). The insured, irked by the increase in premium, asked the other agent if they can improve on what they have. In order for them to look at it, they will need a 'broker of record' letter or BOR that will allow the wholesaler that was blocked to negotiate terms on their behalf with the insurance carrier. Once the 'second' wholesaler clears the markets (in this case, it was me), they will be able to present the quotes the current company already provided.
I found fairly competitive quotes, but unfortunately, just because I'm now the broker versus my competitor doesn't mean the price is changed. I'm basically taking over the quote from the other wholesaler.
Some insurance carriers will even quote the risk for both brokers if BOR letters begin going back and forth. I think this is a great idea since it allows the insured to focus on the relationship part of the business versus just the lowest quote price.
So, for the insured, what is the advantage of going with one agent and one broker over another? That is a long answer that I'll try and cover in future posts, but it centers on who is being the most creative with the puzzle pieces in the market and how to put them together, who is the most responsive to your needs, and who you enjoy working with.
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