Your agent doesn’t work for you. Your agent says they give you the best rates. They’re very responsive when you have a claim or a question. Isn’t that working for you? Is it? How does it really work? When the agent gets paid a percentage of what you pay – how can they really be looking after your best interest? If you pay less don’t they then make less? How much do they make?
Let’s take a look at these issues. An agent makes approximately 10%-15% on workers’ compensation and 15%-20% on property and general liability policies every year – some cut special deals with the insurance carriers for higher commission rates. Some are as high as 30%. This is a percentage of the total premium. In addition to this, the agency gets an additional contingent amount of money if the agency writes a certain volume of profitable business with an insurance company. So in fact, there is an incentive to write business with some insurance carriers over others – how much commission up front, how much back in profit sharing.
When you receive your insurance proposal does it list the commission on the premium page? Does it tell you what the agency will get if they write business with that carrier? Most agents do not give you the commission amount and agents never say what the contingent profit sharing plan is with each of their carriers. Does your agent work for you? No, they operate a business just like you and it is for PROFIT, but their profit is your loss unless you are savvy enough to know how to navigate the waters. How much profit should they get?
Insurance agents and insurance carriers should make a profit. All for profit companies should. However, it seems that their profit at times is a bit large. Consider that as a consultant we average a savings of 35% on 98% of the accounts we work with in our company. Consider that every year we find a client where we save them 50% or more. This years large savings is over 75%. How can that happen? Are the business owners asleep at the wheel of their own business? No, it is the system that sets it up this way. It is a product that most do not fully understand. Until recently the system only had the “insurance experts” of insurance agents to help business owners out with this process. They are “the system”. The best avenue is to look beyond “the system” and that is with independence.
You can hire a full time insurance specialist but they need to be in the insurance industry and know as much as possible about the insurance market place or you can hire a consultant, both need to be paid directly by you – the client. The goals in mind should be coverage for least cost, with excellent service. Who do they work for, one person, you. Why? Because you are paying them to do so – not the insurance companies by how much you pay. The best part of this is some consultants – like our company – believe so strongly in what they do – that they offer the service to companies as a win/win. They are only paid if they save you money without jeopardizing your coverage or quality of carrier in any way. The key to saving yourself from paying to much for business insurance is to know what is available to you and using it. Those that pay the most are those that delay the process or avoid it completely.