Assuming you are not planning to deal direct with an insurer, you will need to select an intermediary to act as your representative to the world insurance markets. When selecting a broker, you should take into account the broker’s understanding and proficiency in the types of insurance policies for which that broker will assume responsibility and the exposures inherent within your industry for each line of coverage. Also important is the broker’s ability to deliver professional and comprehensive services that meet your service requirements.
Pinnacle can assist you in selecting a qualified brokerage firm(s) that can provide insurance placement and maintenance services, along with various brokerage services. We can develop the appropriate Request for Qualification, prepare a list of pre-qualified brokers for your consideration and arrange the requisite interviews, and develop an objective evaluation form containing the appropriate selection criteria to be used when interviewing prospective brokers. Pinnacle also can provide insight into the intangibles associated with this process.
Many companies and organizations do not employ the services of a full time professional risk manger. As a result, they may not be as familiar with the various brokers competing within their market or with the questions that should be asked to ensure they are selecting the very best firm and account service team to handle their insurance placement and ancillary brokerage services. Pinnacle brings extensive knowledge and expertise to the selection process. You can be assured that the decision you make will result in the selection of a quality firm and account service team that maintains a clear understanding of the services your company needs.
Pinnacle can assist you in determining the most appropriate means (fee vs. commission) to compensate your broker, and provide you with a recommended range of compensation that we view as being both fair and reasonable for the services to be provided.
The traditional means of brokerage compensation is commission-based, meaning the broker receives a percentage of the gross annual premium on each line of insurance the broker places on your behalf. These percentages can range from 3% to 15% or more. A commission, or percentage-based compensation arrangement, places any broker in a perceived conflict of interest position, since the lower the insurance premium, the lower the commission earned. Conversely, a fixed-fee, or incentive-based fee, will provide the broker with a fair, agreed-upon level of compensation for the work performed or results achieved. Therefore, the lower the insurance premiums, the higher the ratio the insurance broker has earned as a fee.
This compensation strategy allows you to more closely evaluate the value of the services provided to the compensation paid and to more effectively manage business expenses.
Agent/Broker Service Agreements
Pinnacle can develop a comprehensive Broker Service Agreement that will set forth the terms of the relationship between you and the agent/broker(s) selected to act as your representative to the insurance companies that provide your insurance coverage.
Such an agreement will set forth all the appropriate items needed to provide for a clear and concise understanding of the terms of the brokerage relationship. The agreement will define both your responsibilities and the brokers’; your service level expectations; the agreed-upon compensation strategy and amount; termination criteria; indemnity and insurance requirements imposed upon the broker relative to Errors & Omissions; run-off services to be provided; assignability; rules of disclosure and confidentially; and a pre and post-renewal timeline.
Typically, there is nothing more than a verbal “understanding” regarding the responsibilities of the broker and the client with regard to the client-broker relationship. Often times this understanding evolves over several years, and results in the clients overpaying for the services they receive and often not receiving the services they should.
Having Pinnacle develop a Broker Service Agreement ensures you have a clear understanding of the roles and responsibilities of the both parties. It provides for clients to begin receiving services from the very beginning in the brokerage relationship, thus maximizing the value of the commission or fees paid indirectly or directly by the client.