Most people think that when it comes to buying a product or service, obtaining the best possible deal means getting prices and specifications from the widest possible range of potential suppliers and then comparing results. This might be true where the product in question is office stationery or similar. However, it’s emphatically not the case when the product being purchased is an insurance programme or package.
The education sector’s insurance risk is wide and varied, catering for infants through to adults. There are many additional risks to consider beyond general insurance, such as educators’ liability, with special skill sets required to handle emotional claims involving children and even adults.
At first glance the insurance broking process appears quite straightforward. You appoint a broker to present your requirements to an insurer or a number of insurers. The underwriters working for those insurers examine the risk and provide a price and an indication of the scope of cover they are prepared to offer and information on the terms which will apply. On the advice of your broker you select the insurer(s), pay the premium and settle back to carry on your business for another year, secure in the knowledge that you are paying the right premium for the best possible cover and your chosen broker is putting your best intentions first.
Unfortunately, in reality the ‘traditional’ approach outlined above is deeply flawed. The probability is that you will already have a broker in place; indeed you may have worked with that broker for a number of years and have developed a solid working relationship, even a personal connection.
However, in an area such as insurance, where getting it right can sometimes mean the difference between business success and failure, simple business prudence dictates that it is vital to check, periodically, that your current arrangements are working to protect your best interests.
Familiarity with your programme is no guarantee that your broker is presenting it to the market in the most effective manner; it is essential that your programme is presented looking forward and not just back.
It may seem an obvious statement but not all brokers are the same; they vary in size, capacity and competence. The education sector is one which requires specific skill sets in the understanding of the risks involved and how best to manage these. Equally there are a limited number of insurance markets available.
The task of selecting a broker or brokers demands knowledge of the broking market and the specific capabilities of individual brokers. Most people assume that introducing an element of competition will get the best possible results. Unfortunately, however, the way in which the insurance market operates means this simply isn’t true.
This is due to a number of factors, chiefly your incumbent broker almost certainly adopting defensive marketing tactics to help maximise the chances of retaining your business. In simple terms this means approaching as many insurers as possible for a quotation as a way of preventing other brokers from accessing those markets. This is because once a market has quoted (or declined to quote) it will give the same response (or terms) to any other broker that makes an approach.
Where there are a number of brokers involved there is a significant risk of market confusion caused by underwriters receiving presentations which, whilst ostensibly putting forward the same risks, differ in the details they contain. The effect is likely to be a higher rate of ‘no-quotes’ reducing the available market.
When conducting a review, select one alternate broker who can demonstrate excellence in the education sector with specialists who only work on education risk. By using dedicated specialists you should get a proper comparison.
Chris Coomber is managing director of ERA Insurance Cost Management W: www.eraicm.co.uk