As discussed in a previous blog, shopping your insurance has many benefits. To fully maximize these benefits and avoid some of the common pitfalls, it is recommended to follow a thought-out strategy. Once your strategy determines it’s time to shop insurance, how do you really know if your agent is looking out for your best interest and not just their own?
Competition Is Your Friend
As Merriam-Webster explains, competition is the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms. I think we can all agree that healthy competition is good for the consumer. It helps keep pricing in check, encourages good customer service and forces a company to earn your business. Imagine the different experience you would have when buying a new car if there were not dozens of other dealerships around the corner also looking to sell you the same car?
In a car purchase you control the situation because you are able to drive to the next dealer who may choose to negotiate a better price. However, when it comes to shopping insurance for your business, you often work through an agent which shifts who has control. How can you ensure that control is in your favor?
Beware of the Competition Loophole
Common sense tells us that an insurance agent wants to retain their existing clients and build his or her book of business by selling insurance to new clients. In order to retain their current clients and defend against other agents trying to win their business, an agent needs to provide competitive pricing, trust and excellent customer service.
While it sounds like there is healthy competition in the insurance world, there are agents who attempt to protect their book of business by eliminating the competition. This process is often done early in the game through a process called blocking markets. So how does it work?
The current agent submits your account to all the insurance carriers he or she has access to, which can be dozens. As the name implies, this blocks any other agents who also have access to these same carriers from obtaining a quote for your business. This tactic eliminates the competition up front by removing most other agent’s chances of obtaining any quotes for your business. Often, this type of agent then sails through the insurance renewal with little to no competition on the account because he or she controlled the carriers through the process.
Unfortunately, this approach usually does not have the best interests of the business in mind as it clearly does not allow for healthy competition which can lead to decreased pricing, improved value, better customer service, etc. This approach can also burn bridges with insurance carriers because they still receive the submission from the controlling agent and spend time, energy and resources to provide a quote that is often never presented to the business.
Ensure Competition is used for YOUR Advantage
So what can you do to protect your business from being a victim of this blocking markets approach? To ensure your current agent is looking out for your best interest, I recommend implementing a strategy that allows you to control the process. This can be accomplished several ways. The easiest strategy is to determine in advance how many carriers each agent can approach when quoting your policies. You can allow your current agent to select which carriers he/she would like to pursue. Next you can reach out to a competing agent to have him/her solicit quotes from different carriers. This will allow for healthier competition, increased coverage review and improved customer service as you are able to compare quotes obtained independently of each other. If you have loyalty to your current agent, you can consider allowing him/her to have the last look at any other carrier quotes that you may be considering prior to making a final decision.
Unfortunately, blocking tactics occur frequently and these behind the scenes strategies can ultimately hurt your business by removing healthy competition from your insurance pricing. To learn more about other tactics you can use and ensure you have the best strategy in place for your business, please contact me for a no obligation discussion at 610.966.1315.
Insurance products offered through Univest Insurance, Inc. are obligations of the issuing insurance companies, not obligations or deposits of or guaranteed by any bank and are not insured by the FDIC or any other agency of the United States.