The Globe and Mail online published an article entitled "Singing the Home Insurance Blues" March 9th, 2011 (Presumably to appear in a print copy today?).
As brokers, when insurance rates increase, at the front line dealing with our clients every day we feel the results. Not only do we feel the results, but we share the feelings of our clients. Our clients are not nameless, faceless people to us, we think of them and their families and the first thing we do is try and figure out how we can negotiate the best rates for them. As brokers, I will attest that we also "Sing the Home Insurance Blues", but we use our expertise to try and guide our clients through with the best prices and the best options for the insurance industry's current rate trends.
Although there were many issues brought up in the article, some of which I cover in other posts on my blog, I will focus in this post on one statement with some advice attached, that stood out for me.
Rob Carrick, well known journalist, financial columnist stated the following in the article :
"The standard advice if you’re unhappy with how much you’re paying for home insurance is to shop around, but you have to wonder whether that’s just a one-year solution. What if you move to a new company that socks you with a big increase on renewal?
You just switch again. It’s time consuming to find competing quotes, but there’s nothing to stop you from jumping from company to company."
It is good advice to take a look around. It is good advice to find out more about who is insuring you and what their capabilities are in regards to market research.We live in an age of consumers. Business is business.
However, I disagree wholeheartedly with the statement above. There are many things that should force you to reconsider before taking an approach of switching from insurer to insurer - year to year.
In my experience and opinion, it is not at all advisable to switch from year to year.
When you stay with an insurance broker over time, you are the broker's client. The broker can switch you between insurance companies from year to year, however you still maintain the relationship with the broker as a long term client.
Loyalty and long term relationships do carry clout with insurers.
I am willing to wager that if a survey was done within the broker community across Canada, that brokers would state that they have more power of negotiation on rates as well as ability to assist a client in the event of a claim when they have had the client for several years.
The reason for this is simple.
- The broker can establish the total revenue the client has represented to the insurer over X amount of years, showing the client's value to the insurer.
- The broker can speak of the clients character and integrity - because they know them.
- The broker can relate to an insurer all the factors surrounding the client - and the impact the loss of the client will have on the insurer.
As brokers when we present a risk to the insurer we present many factors, our greatest arguments never lie in the current years renewal rates or conditions. Our greatest and strongest arguments are always the ones based on history and in our ability to represent the client's background and the future potential for the client as a profitable and sound investment for the insurance company.
As brokers, insurers have relationships with us. They trust our perspectives, they work with us to foster strong partnerships. In my experience, when a broker goes to bat for a client, and they have a strong relationship with the insurer, you can bet on the insurer doing everything they can to accomodate.
If you, as an individual shop on price and you jump from insurer to insurer, or from a broker to agent, to direct writer, from year to year... you need to ask yourself who is going to stand behind you when you need that extra help?
You may win in the short term, but the basis of purchasing insurance is not limited to the cheapest price.
The basis is so that when you have a loss, you are compensated. You are put back in the same position that you were originally in (prior to the loss) with the least amount of inconvenience - and then- from there, when it comes time to renew your insurance again, that you may have fair rates and fair treatment.
Do you think you will have the best possible advantage when you deal with a company that has only known you for one year?
Do you think that going the route alone is better then having a broker stand behind you with all their clout?
It is a personal decision, but as a broker, and someone who works difficult files every single day by negotiating and using my knowledge of my clients to fight for them, I would not recommend switching from insurer to insurer year to year.
Coming back to the quote, you do have to wonder if it is a one year solution when you jump from place to place. In matters of finance, doesn't it make sense to look at the long term? Invest in a relationship. Like any relationship, there may be some collaborative work to do, but stick with a good choice - a good broker- a stable insurer, and work with them. It will be worth it in the long run.
Additional reading and comments related to this topic : Empower yourself: What does an Insurance Broker do for You? and Our Insurance Approach
Upcoming posts on this topic : The New Loyalty (What happened to loyalty discounts?)
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