The Consultative Broker™ Briefing
Volume VI, Number 4
A Free Publication of C.R. Ekern & Company
888.670.1177
www.crekern.com
Copyright, C. R. Ekern & Company, 2007

---

The Marketplace Is Not The Answer

I was speaking last week with one of the top Risk Managers in North America.  He is considered one of the most astute buyers in our industry.  I asked him one important question, “What would you tell any buyer of insurance who intended to send several brokers into the marketplace on a marketplace competition?"

His answer came back rapidly in one word - “SUICIDE!”  He added, “a buyer that puts several brokers in the marketplace simultaneously is creating their own havoc, and they will needlessly pay more for their coverage and jeopardize the stability of their program.”

We have been saying the same thing for years.  A Consultative Broker understands that the old-fashioned marketplace competition just doesn’t work anymore.  Why?  Because they’re simply aren’t enough insurance carriers to go around.  Eventually, all roads lead back to Rome.  A buyer that has allowed the marketplace to become muddied by several brokers will rue the day they allowed “Amateur Hour” to commence.

At the end of the last hard marketplace (circa 1988), we were able to market our way out of the price increases.  Many of us had a list of carriers that included 20 more than exist today (can you say Home, Reliance, Aetna, Continental, etc, etc.?)  These companies all competed against each other ferociously and were fueled by our battle cry of - “If you can get to this price, we will deliver the deal!”  So the race to extinction was on, and our buyers were delighted with the falling prices.

That’s just not the case this time.  Based upon the results of our recent C.R. Ekern & Company Year-End Survey, the price increases have stabilized, but there aren’t any more carriers that are willing to compete on a given deal.  Oh, and by the way, most of you represent these same carriers.

So, when the buyer tells you to select three carriers for a marketplace competition, chances are that you are wasting your time, their time, and the three carriers’ time.  Not to mention the fact that all these players may actually create higher costs for the buyer as they gobble up facultative reinsurance on the same program.

But here is the good news - Effective Consultative Brokers are learning to compete on accounts by leveraging their ability to reduce their buyer’s costs through resource deployment, program design, balance sheet utilization and consultative services.  In these cases, the competition takes place outside the marketplace and the winner is awarded the privilege of representing the buyer in the placement of their insurance coverages.

So as 2004 unfolds, we will continue to make these techniques the subject of our Consultative Broker Briefings.  As we have continued to say, “If you keep reading, we will keep writing.”  So, don’t miss our next briefing entitled “Five Reasons Why a Buyer Should Appoint You as the Broker.”

Best regards to all Consultative Brokers,

Rob Ekern
President
C.R. Ekern & Company

Consultative Broker Briefing Main Menu

---

Consultative Brokerage® Techniques are utilized by agents and brokers across North America in the development and retention of upper middle market revenues.  The Consultative Broker Briefing is delivered electronically free of charge to selected agents, brokers, and other insurance professionals across North America.  To subscribe to The Consultative Broker Briefing, please click here.

Copyright 2007 C.R. Ekern & Company