Why Insuring Through Your
Insurance Broker May Not
Pass the Pub Test
How to ensure compliance with the
best insurance coverage at the most economical cost.
Procuring insurance is unlike procurement in any other industry: you’re often required to go through brokers.
If you believe that insuring through a broker guarantees compliance with having the best coverage at the best price, you might be mistaken—especially if your broker is an agent for one of the insurers in your insurance (risk transfer) program.
Here is how to best solve your problem.
Traps of Procuring Insurance
- Broker Alignment: Insurance brokers are most likely agents of the insurer, rather than you.
- Commission Conflicts: Brokers typically receive a commission on premiums, so a lower premium means a lower income for them.
- Competitive Blocking: Your existing broker can block competing brokers from obtaining a better price with the insurance company through a process known as “reserving.”
- Tendering Pitfalls: Running a price tender for your insurance is a big mistake because of the reserving process.
A Better Way of Procuring Insurance
To secure the best insurance coverage and costs, focus on reviewing and appointing the broker rather than the insurer.
Follow these steps:
- Start Early: Begin the process six months before your insurance renewal. Seek advice from Comprara.
- Risk Profile: Establish an insurable risk profile and conduct a gap analysis.
- Benchmarking: Compare your existing coverage and costs against industry data.
- Broker Panel: Obtain indicative covers and costs from a panel of brokers, including your current broker.
- Review and Appoint: Review the submissions from the panel and appoint a broker to provide an actual insurance quotation.
What is Insurable Risk Profiling?
Insurable Risk Profiling identifies your insurable risks
from your Enterprise Risk Management Framework (Risk Registers).
This process ensures your insurance coverage is fit-for-purpose,
meaning you’re neither underinsured nor overinsured.
In other words, it helps you achieve the right balance
in your insurance policies to adequately protect your organisation.
The more your broker complains, the more likely you’ll save.
If your current broker resists the process of restating their capability, it’s a strong indicator that you could secure better coverage at a lower annual cost.
A competent broker should have no difficulty restating their capability, as this is a fundamental governance requirement for all organisations. In our experience, the incumbent broker is often reappointed but usually on terms more favourable to the client.
