Three Tips for Your Insurance Tender
Insurance tenders can be complicated, time-consuming and at times, political. Often they occur at busy, year-end times and it can be difficult to commit to performing a fair, robust and successful tender. However, tenders are important exercises to keep your insurance program performing as well as possible and at competitive value. When conducting your insurance tender, here are three important things to keep in mind.
Determine the goals of the tender and what the tender is to achieve
Determine what you are looking to achieve and what is most important to you (your corporate values), based on both your culture and on your past experiences.
For example, have you had lots of trouble with claims? Make it clear in the RFP that you would like details on the broker’s claims management approach. Ask questions and/or specify pre-arranged adjusters.
Are insurance premium costs your biggest concern? Ask brokers to either give opinion on and/or approach many markets (domestic and international). Ask the broker to specify what their fees would be, and what extra costs there may be (for claim management, for adding lines of coverage, etc.).
Is coverage a concern? Is your current property, general liability or business interruption policy really long and cumbersome? Are there some exclusions or sublimits that are of concern? Then you need to focus on specifying the details on the coverage you need and the exclusions, warranties and restrictions you don’t.
What about insurer quality (fairness and expedience of claims)? Tough one to get a straight answer on. Best to rely on peer information or independent opinion on insurer quality.
Is brokerage service most important to you? Ask for key performance indicators and strict timelines that the broker would get back to you on emails and phone calls. Ask for details on how often you would meet face to face. Ask for (and actually contact) references the broker provides.
It is useful to align your goals and manage expectations. Of the four qualities of an insurance program - cost, coverage, quality and service - how would you like to optimize? Be reasonable in expectations and accept that you may not be able to get it all.
Prepare thorough and clear documents
The three main tender documents (Request for Proposal, Insurance Requirements and Insurance Underwriting Information) are pivotal to the success of the tender. These documents should be prepared carefully and conscientiously. They will be read by perhaps dozens of people.
Other documents - evaluation matrices, “apples for apples” cost comparison spreadsheets, etc. - can be more relaxed.
Also, producing high quality documents for your insurance tender will help keep it fair. All proponents will have access to the same information. It is important to include enough information in the IUI to allow other proponents to be competitive against the incumbent (who has a large head start in terms of knowledge).
Well-prepared documents also save you time in minimizing questions, uncertainty and politics from proponents. Ultimately, high quality documents lead to more informed quotations, providing a more accurate estimate of or more competitive quote on insurance costs.
Give yourself enough time
Insurance tenders can be time consuming, so it is important to allow as long a time period as you may require. This is important for several reasons:
It allows you to provide the proponents with a reasonable time (say 4 or 5 weeks) to respond. It is a lot of work for the broker to put together a full response to a brokerage RFP and it is respectful to your proponents to provide a sufficient amount of time. Additionally, higher quality responses will be received.
- Build extra time into the schedule so that a two-stage approach to tendering is possible: conceptual desk quotes, then allocated market quotes (if feasible). If you want more reliable cost information to make a final decision then a two phase approach will help a lot but it may take a couple of weeks longer.
- If you are a large organization with complex or unique risks, give yourself time to meet the broker’s selected underwriters in person.
- Allow time to both make a well-considered decision before the renewal and for negotiation and preparing the brokerage contract, not to mention final aspects of marketing (especially if you have to change brokers).
A well planned, well executed and well timed insurance competition (be it a quotation tender or an RFP-based exercise) will always produce better results.