Transcript A 360 Perspective ofth Bid Process

Broker Value and
Valuing Your Broker
Strima 2008
Allen F. Hyman
Bickmore Risk Services
The Macro Perspective
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46 years experience with
government
• As an employee
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13 yrs. Parks, Recreation & Spec Facilities
13 yrs. Safety, Risk, Pool Administrator
• As a broker and consultant to
government
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20 years
The Micro Perspective
End User
Account Executive
Legal
Broker
Procurement
Constituents
Competitors
Underwriter
Wholesaler
Specialty Professionals
What is “Value Added?”
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If you hired one person to place your
insurance who provide no other
services until the next renewal, there
would be no “added value.”
Where’s the Beef (Value) ?
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Brokerage Organization Infrastructure
Market Knowledge/Leverage
Marketing Specifications
Collective Expertise/Placement Pros
Program/Policy review
Contract Review
Certificates
Technology
Specialty Professionals
Account Team
Claims Resources
Zoom In
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Benchmarking losses and costs
Industry knowledge
Tech resources
Actuarial review
360 perspective for gapless program
Solution modeling and alternatives
Market clout
Terms conditions and policy analysis
RM consulting
What is a Broker ?
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Defining the “broker” and brokerage team
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Broker
Agent
Client/ Account Executive
Placement Professional (s)
Client Service Representative (s)
Senior Relationship Manager
Industry Practice Specialists
Claims & Loss Prevention Specialists
What are a Broker’s Objectives
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Brokers want the best possible deal for the
client related to terms, conditions and
price.
Underwriters expect a negotiated solution
with profitable pricing and a partnership.
Pricing and terms are always negotiable.
Application & historical data review are
critically important.
Broker’s Bidding Challenges
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Obsolete documents
Boilerplates
Requirements (unreasonable?) Performance Bonds
Co-named on E&O
Cut and paste errors, redundancies and
contradictions
Unnecessary/voluminous requirements
Poor data
Open claims
Commoditized purchase attitude
Buyer lacking necessary understanding
Time constraints
Insufficient opportunity for negotiations
Open market offerings
Unclear objectives/service expectations
What and who to include in the oral presentation
What is driving the award
How are Brokers Compensated
Does compensation drive deals?
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Commissions
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Used to be sufficient to cover all costs & profit
Where does commission come from?
Negotiated with underwriters
May still be in the clients best interest
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Impossible to determine true net quote
• Should be disclosed from all sources
• Historically range from 5 - 25+%
• Front end/back end issues
How are Brokers Compensated
Does compensation drive deals?
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Fees
• Client budget line item
• Create internal issues in brokerages
• Can generate skin and bones service
• May lead to front end promises/ back
end non-delivery
• Fee/Commission offsets
• Change in Scope of Services
• Duration issues
High Bidder versus Low Bidder
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Bid 1 Bid 2 Bid 3 Bid 4 Bid 5 Bid 6 Bid 7 Bid 8
WHY?
WHY?
Broker Behind the Scenes
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Historical Perspective
Perception of Government Procurement
Pricing of Services Committees
Team brainstorms
Fee Models
Profitability/ Opportunity Cost
SWAGs
Size of the book
Service expectations
Dividing the pot
Competitive environment
Value Added
Internal preparation of proposals
Market relationships
• Incumbent advantages
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Many important questions are not asked in pre-bid meetings.
When Price Drives….
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Insurance solution may be diluted
Services may be limited
• Internal charges often affect services
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Underwriters do not believe a
relationship exists
• For many reasons, underwriters want
time with a insured
When Service Drives
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Bottom line does not steer the
proposal
• But it is factored in
• Underwriters feel differently
• Broker feels partnership is stronger
• Client expectations need to be clear
• Performance measures should be
created
Recommendations
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Decide what you are buying?
Review the bid documents in advance of release.
Clarify drivers and priorities in the offering.
Take the time to create scope of services – even
one year out.
Understand market conditions before bidding.
Create the best possible package of data.
Consider needs and desires of sellers.
Coach procurement well in advance of offering.
Demand disclosure.
Consider stronger relationships with all
component players.
Making an RFP complex does not assure a better
outcome.
Conceptual proposal vs. conceptual/creative
section