How do you choose the best commercial insurance agent to represent your business?

Having the right person representing your business in the insurance marketplace is critical.

Your business will either be benefitted by or limited to, or a mixture of both, the strength of the relationships a given agent possesses.

So how should you choose the best agent for your business?

Start by asking yourself this question: “What risk management goals have I set for my business?”

Then evaluate candidate agents according to their ability to help you meet those goals (HINT: being friends or family with someone has zero to do with their professional ability to hit a grand slam for your business.)

Are you a coverage first kind of person?  Do you want the safety of knowing your business will be protected when disaster strikes?

Or are you perhaps a cost first kind of person?  Would you sacrifice some coverage, retain more risk, and hope for the best in order to potentially save a small sum of money?

If you are the latter, let me save you time and tell you to stop reading now.  Don’t waste even one more second of your time even thinking about your business’s safety and well-being and who is best qualified to help you.

Why?  Because if you are motivated by cost, you will almost always end up with insurance coverage that resembles Swiss cheese (meaning it’s full of holes, if you missed the reference) regardless of who you choose to be your agent.

Cheap insurance is almost always cheap for very good reasons.

I realize savings are a blessing for any business, and a good thing so long as quality is not compromised.  Please don’t think I am against saving cost.  I simply take the coverage first position.

As we make our way through this, I’m going to touch on some strengths to look for and potential weaknesses to watch for when choosing an agent to represent your company.

Please keep in mind as you are considering all that follow that I would not touch any insurance company that does not have at least an AM Best’s financial rating of A with a ten foot pole.

You can have the most amazing policy ever, and if the insurer is insolvent they have no resources from which to pay your claims anyway.

In other words, if the agent you are considering does not offer quotes with A or better rated insurers, forget everything below and run the other direction as fast as you can.

Remember also that the size of an agency does not *necessarily* determine its ability. I think in general larger agencies do tend to have stronger relationships and therefore stronger capabilities, but not always.

Don’t count the regional and local agencies out before asking if they may have a unique strength that will help you. If you leave the smaller and regional agencies totally out of the equation, your business may miss out on something great that the larger agencies actually may not even be able to offer.

I know it sounds crazy, and you’ve probably heard from at least some agencies, “Hey, we can get to anybody (that’s FALSE by the way),” but it is sometimes true the smaller agencies have access to a program or two that the larger agencies do not.

Last thing before we get started: claims. If your business is riddled with claims, or has one or more large claims, good insurers are going to be apprehensive to quote you regardless of your agent.

If that describes your business, you need two things. First, you need implemented and documented changes that demonstrate to the underwriters that they are in no danger of similar future claims.

Next, you DEFINITELY need an agent that has a super strong relationship with underwriters and can help those underwriters see the awesome parts of your business over the bad claims.

Now, for those of you who agree with me that coverage is more important than cost is some information you should find extremely helpful:

Let’s start with the good stuff.

A good risk management relationship has almost nothing to do with how much you like the insurance salesperson with whom you do business.

Translation: FORGET ABOUT FRIENDSHIP (at least at first.) Friendship can be the biggest prison of all in commercial insurance.

I know people are going to hate this, but it’s true. There are folks who would save a truckload and get better coverage by moving their insurance and paying their friend’s commission for nothing.

They never will. Why? Friendship. There is no price on friendship. So, the business owner may indefinitely continue to bleed six figures a year.

The business owner may not even be willing to consider the possibility of better options their friend does not offer.

Never mind that a true friend will want what is best for you even if it is not good news for them. Fear has taken over, and the business owner is paralyzed.

Friendship and close personal relationship matter. They matter more than anything else in life. That said, protecting your business is not a friend-making mission. It is about protecting your business.

You need to think about your business first and whether or not a given agent has the best and strongest ability to provide the most robust coverage for the best premium, not how much or how little you like a salesperson.

Again, coverage first right?

So which agents have the best coverage options?  Here’s what I look for in an agent or agency when I help my clients find quality coverage:

  1. Does this agent have any sort of special relationship with one or more commercial insurance companies?   

Is their agency the number 1 or 2 in terms of how much business they have with a particular insurer or insurers?  

Are they best friends or family with a key individual in insurance company leadership?  In other words, is there something special we can leverage to get results we simply will not get with other agencies?

Does the agent have an “ace up their sleeve” with a particular insurer where the insurer might owe them a favor, and could your business benefit from that?

If so, you may be able to get a quote from an insurer that would not normally quote your particular line of business and it may be fantastic in terms of rates and quality of coverage.

If the answer to both of those is no, expect average or less-than-average results.  If the answer to one or both of those is yes, you have a chance at getting more for less.

  • Does this agent/agency have a proprietary policy that fits what the client does?

This is a scenario where an agency has gone to a particular insurer and procured exclusive rights to sell a policy tailored for a given type of business.

The agency will have exclusive rights to this policy, and in turn will agree to give that insurer the first right of refusal on any such business.

Short version:  this could be an amazing policy that costs even less than other policies of inferior quality, and you can only get it through that agency.  You may even get other policies with the same insurer through other agencies, but they may not be nearly as good.

  • Does this agency get better overall rates than others?

Contrary to what you have likely heard, insurance rates are FLEXIBLE (with a few exceptions such as workers comp rates which may be established by state law – – – but even then there are ways in which some agencies may be able to outdo others to help you save).

Getting better rates is often much like getting better coverage in the sense that insurers tend to be willing to bend a bit more for agents/agencies that have a stronger relationship with those insurers.

  •  Has this agent/agency been able to accomplish “extras” for past clients in a similar industry?

Most agencies will simply put forward policies as they are written and offered by insurers.  Some agencies are able to get changes to the policy language, and some agencies effectively get told to go jump in a lake if they request such changes.

(Hint: If you have not already picked up on this – – – if you are marketing your insurance package, use multiple agencies to do so, assign them specific insurers with whom to quote, and do not give a single agent carte blanche in the insurance marketplace!)

Notice what is missing here:  how nice they are, do they give us nice gifts, woo us?  How responsive are they to our needs when we call?

I hear all the time, “my agency is super responsive!  Always providing certificates quickly when I need them!!!” or “my agent has been helping us for many years, and I really like him/her!” or “we get to go to the Bahamas every year, and that’s wonderful!!!”

Trips and gifts are always a nice extra, but if you’re spending $100,000 more than you could/should be to go on a $20,000 or less annual vacay who is truly winning there?

And while a quickly-delivered insurance cert is great for not slowing down your operation, think about what that certificate represents…….a policy.

If I am quick to provide a certificate that represents a really crappy policy that is riddled with exclusions, what good is that really?

Now for the bad relationships.

These are the ones where you become attached (or sometimes unknowingly trapped) to an agent that is simply average. They are not terrible, nor are they great.  They are just your everyday, super-nice, well-meaning insurance salesperson.

They also likely do not know what they do not know, and have no reason to think they are missing anything.

Further, they are almost certainly unaware of the capabilities another agency has that their own agency does not.

Many agents with whom I have spoken seem to feel as though one agency can do pretty much anything any other agency can do – – – and I’m here to tell you that simply is not true.

I have multiple experiences where an insurer would quote for one agent and not another, would remove coverage exclusions for one agent and not another, and offered better rates to one agent than they did to another.

The agent on the losing side of that sometimes balks and tells me I’m full of prunes, and I just have to roll with it because I would likely feel the same way they do if I were in their shoes but I have quotes and policies in my files that back up everything I’m saying.

Anyway, moving forward with identifying a potentially bad risk management relationship……

Here are some “red flags” when I am considering an agent to represent a client:

  1. Does the agent have to broker the client’s business through another agency?

If your agent has to broker your policies out through another insurance broker/agency because they do not have the direct relationships with insurance companies who insure businesses like yours, you should be cautious.

Brokering does not necessarily mean you’re getting a lousy policy or bad rates, but in general a direct relationship between your agent and an insurer(s) will produce superior results for you.

Ask whether an agent uses a broker and if they say yes that may be okay. Just be aware, read everything diligently, and be wise.

If you can find an agent who does not have to go through a broker to get to those same insurers, you may wish to allow them to quote instead, but that is entirely up to you.

  • Does the agent/agency write mostly “admitted” policies, or do they mostly have to use what is called “excess/surplus (E&S) lines”?

Put simply, excess and surplus lines can be considered “last resort” insurance policies.  They are often TERRIBLE in every way you can fathom.

Short version:  insurers are required to submit their coverage forms to state governments to be approved for use, and also to submit the range of rates that they intend to charge.

The state then approves those forms and rates.  Hence, an “admitted” policy/insurer.

E&S policies/insurers are not subject to such scrutiny, and the state allows E&S because folks need insurance and many times cannot get approved by an admitted insurer.

Because of the liberty E&S insurers have, they could write policies that are far better than admitted policies but that is 99% likely never to happen.  They are almost always more expensive for inferior coverage and less of it.

Bear in mind here, even the best agencies sometimes have no choice but to go through E&S markets through no fault of their own, but simply because the insured has been turned down by every available admitted insurer – – – often because of bad claims experience within the most recent 5 year period.

  • Does the agent flood the market when they quote you?

This is a little less obvious and requires some digging.

Most agencies will send out applications on your behalf to who knows how many insurance companies, and you’ll likely only see the ones who quoted and perhaps a few who declined.

Rare are the times any of my prospects have a list of all the insurers approached and the results of each one.

Flooding the market is a practice whereby an agent/agency sends out applications to every insurer they know, in full knowledge most of those insurers will not quote for them.

Once an insurer receives the first application for insurance, whichever agency is on that application then becomes the “agent of record (AOR),” and no other agency can get a quote from that insurer.

Hence, flooding the market locks every other agent out.  No competition.  It’s a guaranteed win.  It almost always means you could have gotten other quotes that may have been far more favorable, but you’ll never know what they would have been.

How do you get around this when marketing your business’s insurance?  Specify which insurers an individual agent is allowed to approach in writing.  Make the agents sell you on which insurers they should represent for you and why.

Then, make sure to ask in writing for a list of all the insurers approached whether directly or through a broker to make certain nobody unintentionally stepped out of bounds.

Last, but not least, agencies who flood the marketplace keep their clients locked in at renewal by blasting out renewal applications automatically around 3-4 months before the expiration date of your current policies.

This guarantees you cannot go anywhere because again, no other agent is able to obtain a quote for you.  

They will tell you they are simply doing their due diligence for their insured.  Maybe so, but in doing their “due diligence” they could be robbing their insured of significant improvements and savings that are available elsewhere.

Now, before any insurance agents who read this go off the rails because they think I am spitting venom let me be clear:  I work with some excellent insurance agents who I am beyond thankful for and could not do business without.

I think insurance agents by and large are good people, not sinister, and have the best in mind for their clients.  That includes your current agent, whoever that may be.

Like other industries, there are good and bad and sometimes it is hard to tell the difference on the surface.

One last important note:  don’t ruin a friendship when you don’t have to.  If you read this and it stirs you to go back through your policy information you may find issues that make you angry.

Please do not call your agent and tell them off. Trust me, it will not help.

I have seen policies written through the largest agencies in the world, and every single one of them has had multiple issues that needed some level of attention.

It is likely you could have ended up with at least some of those same challenges regardless of who you chose to be your agent, and your agent is not out to get you.

They are almost certainly offering you the very best policy and rate they have to offer, and I think it is highly unfair to expect more than that from anyone.

I hope all of this proves helpful for you as you consider how best to insure your business and manage its risk.

To Your Success,