Broker Tenders Guide 2015 WEB
Broker Tenders Guide 2015 WEB
Broker Tenders Guide 2015 WEB
Guide 2015
Contents
Introduction
Choosing an insurance broker is an important decision in the
purchase of insurance. This guide is designed to offer advice on
the process of running a tender for services and negotiating a
contract with a broker. The advice contained in the guide is relevant
to all organisations, but with a particular focus on large accounts
where typically more complex cover is in place. For the smaller
organisation, the activities and timeline will remain the same,
although less detail may be required to complete a review of current
and required solutions.
The role of the insurance broker is varied but includes the proper
disclosure of material information to insurers, the negotiation of
policy price, coverage levels and wordings, the provision of advice
and assistance throughout the duration of the relationship and giving
assistance to the buyer in the event of a claim. As the buyers gateway
to the insurance market, choosing a broker with the right skills,
knowledge and market relationships is vital to the success of the
insurance purchase strategy.
The broker will become the trusted partner of the insurance buyer.
The broker should be able to offer advice on the existing programme
and challenge the buyer around new coverage, value added
solutions, programme design or innovation. The broker will require full
understanding of the buyers organisation, its current performance and
ongoing strategic plans to ensure cover is held in place and relevant
disclosures are made. Because of this, the relationship between the
buyer and the broker is key.
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Deciding to Tender
Tenders for the services of a broker can be a time-consuming
process for all involved, so the decision to run a tender is never one
taken lightly. Insurance service tenders are equally time-consuming
and costly for the participants, and so entering a tender without
the authority or willingness to move the account is discouraged.
All participants enter the process with the understanding that a
genuine opportunity is present.
Benchmarking a broker is good practice to ensure effectiveness and
efficiency, but will not always involved a full tender process. In cases
where the purpose is to examine the performance of a current broker,
the buyer may consider a desk-top exercise with another broker or the
use of an independent consultant. If there the purpose is a full review of
services, including programme design, innovation and pricing, and there
is the possibility of moving the account, then a tender could be used.
There are many reasons for making the decision to tender, including:
Change in circumstances
If the business takes a considerable change in direction, merges
or acquires other businesses, changes its portfolio or business
model, or moves into new global markets, this could prompt a
broker tender to ensure that the correct specialists are engaged
on the account.
Innovation
A broker tender can lead to more considerable changes to
programme design or servicing style than might be seen at a
typical renewal. If the insurance purchase strategy changes, a
broker tender can offer a wider range of responses about how
best to manage the current insurances.
Performance Issues
If a broker continually underperforms and the buyer has given
ample opportunity to remedy this, the client may choose to tender
to ensure they are receiving the required level of service.
Audit and Governance
As risk increases in importance to boards, so does the level of
transparency required in all related transactions. For this reason,
it is important to be able to demonstrate that a sound broker
choice has been made, delivering on as many of the defined
criteria as possible. This is also important to shareholders and
external stakeholders to provide evidence of efficient process and
spending controls.
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Decision to initiate
tender
Week 12
Step 1
Week 14
Participants invited
to take part
Step 3
Step 2
Step 4
Pre Qualification
Questionnaire sent to
brokers
Step 5
Step 6
Week 16
Submission of
Pre Qualification
Questionnaire
Week 17
Week 19
Step 7
Deadline for
submission
of questions
Invitation to complete
Reponse to Tender, with
full documentation pack
Step 8
Responses
to questions
issued
Step 9
Week 21
Deadline for
submission of
RFP
Week 23
Week 24
Presentations
held
Invitation to
continue in
process
Step 11
Chosen broker
informed
Step 10
Step 12
Step 13
Week 25
Broker
appointed
Week 26
Begin
insurance
renewal
Renewal Date
/ Week 52
Insurance
renewal
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Step 14
Step 15
Selecting Participants
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When considering the participants, the panel will need to consider the
organisations own criteria for an insurance broker. These considerations
may include:
Company
culture
Reach
Global servicing
Service
requirements
Broker size
Specialist lines
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As part of the tender structure, the client should have a clear idea of
how many participants will take part in each stage of the tender, with
the number decreasing as the tender progresses. If a large number
are invited, it may be wise to have a pre-qualification stage. The
number of participants will be determined by the time and resources
available internally, but as an indication, there could be as many as five
participants in a written tender stage but not more than three in the final
presentation stage.
Selection Criteria
Before starting a tender, the selection criteria should be agreed by
all internal stakeholders. This not only includes those with day-today accountability for insurance but also those with accountability
for risk, including the board and Non-Executive Directors. It is of
vital importance that stakeholders are involved in the decision
to appoint a broker, so individual scoring should be completed
to improve objectivity and the scores accumulated to give a final
outcome.
Criteria will change depending on the nature of the business, the
tenders objectives, the companys priorities and the insurance purchase
strategy, but areas to consider include:
Areas to consider
Access to
expertise
Ability to supply
Remuneration
Broker remuneration
Disclosures of commission
Required level of transparency over all income
Approach to
service
Cultural fit
Coverage
pricing
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Sub-contractors
Insurance
Data handling
Global spread
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Contacts
Timeline
Response format
General conditions
Selection criteria
Agreement information
Programme information
Claims history
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Programme
design and
innovation
Pricing
Remuneration
KPIs
Claims
management
Market
relationships
Additional
services
Transition plan
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Broker Tender Guide 2015
Broker References
Collecting references can give the opportunity to talk with an
existing client about their views of the broker. This allows a greater
understanding of a typical day-to-day relationship with the broker
than the headlines and pitching of a tender will allow. References
could be collected as part of a pre-qualification questionnaire or as
part of the tender document.
A good candidate for a reference should be a client whose risk profile
has something in common with that of the buyer. This could include
industry sector, size or scale of business or geographical spread. The
broker should contact their clients to ask permission before naming
them as a referee, but it may be worth requesting more referees than
needed to ensure that sufficient references are received within the
timescales.
References can be collected either by call, email or face-to-face
meeting. It is worthwhile preparing planned questions in advance,
regardless of the method used, to ensure that comparable feedback is
gathered. The reference should provide insight into how the relationship
works, what the particular strengths of the broker are, and any issues
that occurred and how these were resolved. This should give a more
balanced view of working practices.
Written Response
In general, the first response to an ITT or RFP will be a written
report. When outlining the requirements, consideration should be
given to the key elements of the purchase to guide participants to
these areas, while allowing enough scope for them to bring forward
ideas.
Remember that all written responses will need to be scored by the
tender panel, so the more direction that is given, the easier the process
will be. This includes providing a report structure for ease of comparison
and limiting the page length of the tender. This will also encourage more
tailoring of the report to the needs of organisation and less generic sales
material.
Depending on the number of participants and quality of responses
gathered, the consideration of written responses may lead to some
brokers being removed from the process. Any participant with a
response that does not meet the minimum requirements, whether on
service levels, global supply or projected costing, should be informed
that they will not be taken forward to the final presentation stage.
Similarly, if a longer list of brokers remains in the process than can be
taken forward to the presentation stage, some participants should also
be eliminated at this stage. The scoring criteria put in place prior to the
tender will provide a method of rating the responses.
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Presentations
In most cases, the final stage of a tender will be a presentation.
Following the written responses, using the defined criteria, the list
of participants may be objectively reduced to a final short-list. If
the incumbent broker is part of the process, it may be worthwhile
to have them present first, as they will provide the benchmark for
current services.
It is essential that the team responsible for servicing the account is part
of the presentation. This allows the internal and broker teams to start, or
continue, developing a relationship. These relationships will be critical
to the success of the partnership and so should be encouraged from as
early as possible.
The presentation could take a number of forms. It could directly
correlate to the written response or it could select elements of the
tender to focus on. It is important that comparable scoring can be
achieved. Outlining distinct presentation criteria for each participant
could prove challenging, but is not impossible. Another option is to use
some common themes to expand upon from the tender to get around
this problem.
As mentioned, this is also the time to more closely examine the service
team, so this would be the time to ask service-related questions, such
as how issues would be resolved, as well as technical questions, for
example about the programme design.
At the end of each presentation, allow for a question and answer
session to cover any points that have arisen from the tender or from the
presentation itself. This can also provide the broker with a chance to ask
any further questions they might have about the buying company, the
team or the account in general.
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Decision Making
OBJECTIVE BROKER EVALUATION
Alastair Torbet MA. ACII, Commercial Director and Colin
Paterson ACII, Managing Director
Insight Insurance Consultancy
Risk Managers increasingly have the task of not just
satisfying their immediate company boards in terms of good
governance. Increasingly they have to satisfy the wider
corporate stakeholder community that the highest standards
of Corporate Governance are being met stakeholders will
include Non Exec Directors, Investment Community, including
shareholders and lenders who can include banks and PE
Houses.
This means that a rigorous process of evaluation, maintaining
objectivity and transparency that stands up to Board and
stakeholder scrutiny is key. Pitfalls to avoid are:
1. Being drawn to the team you know the best but who may
not deliver fully to the business
2. Swayed by a strong sales proposition without fully
understanding the delivery behind the promises made
3. Difficulties in comparing one proposition from the other i.e.
apples with apples.
To maintain objectivity, businesses and Risk Managers are
increasingly turning to external advisers to back up the process
and ensure the best decision is reached on behalf of the business.
In delivering transparency, there are 7 key areas for consideration,
as per the below table.
Area For
Consideration
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1. Business
Understanding
2. Innovation
3. Market
Approach
4. Risk
Management
Application
5. Service Delivery
6. Likeability
7. Transparency
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Next Steps
Following the selection of the broker, the winning broker should
be informed and negotiations will be required around contract
engagement, Terms of Business Agreements (TOBAs) and Service
Levels. These negotiations are covered in the next section of this .
Information provided in the tender is unlikely to be binding, unless
stated as such, so items such as fees and penalties, limits of
liability and service structure can also be negotiated if required.
Unsuccessful participants should also be informed at this stage,
particularly if they include the incumbent. Unsuccessful participants
are likely to request feedback on the decision. Generally, this would
be collected by someone external to the team who participated in the
tender, and this is very helpful to the brokers in understanding what
was found to be attractive about their proposal and what was less so.
If possible, the tender panel should provide this as it can prove very
useful for the participant brokers, as well as helping shape ongoing
relationships with them.
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Broker Remuneration
In an RFP, a broker will have set out estimated costs for their
services. In most cases, these will be a guide, to be discussed if
and when the appointment is made. For this reason, clients should
expect to have some conversation around remuneration when
beginning to negotiate the appointment. Equally, if the incumbent is
reappointed, proposals from within the tender responses could lead
to the conclusion that discussion of remuneration is required.
The costs set out in an RFP will likely be estimated based on the
information provided during the tender. How accurate these figures are
will depend on the level of detail that was given. If only some coverages
were included or if additional services will be included, the figure in the
RFP may increase.
At this stage, confirmation from the broker may also be given on what
their total income will be and how this will be made up. The following are
common methods of earning for insurance brokers:
Type of income
Paid by
Service fee
Client
Additional
service / project
fees
Client
Brokerage
Client /
Insurer
Commissions,
insurance
service
brokerages,
profit shares,
volume
commissions,
additional fees
of services
Insurer
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Frequency of meetings
Account stewardship
Communication methods
Response times
Documentation
Policy issuance
Invoice issuance
Innovation and
design
- Programme design
- Stress testing of programme
Information and
support
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2. Business Relationships
In relation to the class of insurance to which this checklist refers,
we have business relationships with the insurance companies
(as named below) involved in this insurance programme, as
follows:
Financial links with the insurers
(including any equity interest)
Finance provided by any insurer
Provision of staff training programmes
Provision of staff incentives by insurers
Work transfer arrangements and payments.
3. Market Search
In relation to the class of insurance to which this checklist
refers, we undertake a market search on the following basis
(more than one answer allowed) and we will supply additional
information, as appropriate:
Acting as your agent
Full market search
Limited market search
Panel of insurers for this class of business, as named below
Scheme with specific insurers, as named below
Specific insurers, as named below
Only offer insurances from the insurer, as named below.
4. Placement of Insurance
In relation to the class of insurance to which this checklist
refers, when we place the insurance contracts the following
circumstances apply:
Acting as your agent
Placement recommendations will
have no impact on earnings
Placement recommendations affect
earnings in the following way.
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Broker Tender Guide 2015
5. Claims Support
In relation to the class of insurance to which this checklist refers,
we provide claims support services in the following basis:
Acting as your agent with primary insurer
Acting as your agent when collecting
money from the subscription market.
6. Future Disclosures
In relation to the class of insurance to which this checklist
refers, we confirm that all of the above information is accurate
and completed to the best of our knowledge and that in future we
will provide relevant information:
Automatically at the time of placement / renewal
Without further request from you
For each line of business / class of insurance
For each country in which you operate.
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6 Lloyds Avenue
London
EC3N 3AX
Ph. +44 207 680 3088
Fax. +44 20 7702 3752
email: [email protected]
www.airmic.com