Fresh Eyes: How an Insurance Broker Tender can be of benefit

The benefits of running a tender for your insurance broking services are numerous and bespoke to the needs of your business. Long-term relationships with your broker can lead to the “inertia of the incumbent”. Insurance policies are renewed each year with minimal change to strategy, coverage or premiums.

With the right circumstances a tender will challenge the broker and the status quo. RAS has observed time and time again amazing results for our clients following an independent tender process. Competitive tension and a fresh set of eyes can often ensure clients’ risks are appropriately addressed and premiums are optimal. A tender will always provide clients with one of two great outcomes:

1. Either it validates that your current broker and programme are market leading, or
2. The competing brokers will challenge markets and strategies to get you, the client, the optimal cover you deserve.

Challenging the Status Quo

Recently RAS was contacted by a client who owns a luxury resort in a catastrophe prone location and sustained one large property claim from cyclone damage (over $20 million). Following the claim, the incumbent broker renewed the same insurance programme annually which resulted in the insurance market steadily increasing their pricing to recover their losses. The problem for the client was that their insurance premiums eroded profits to the extent that the asset had become uncommercial.

RAS noted the incumbent broker was doing a traditional placement including many overseas markets in an effort to keep the property insured at 100% capacity. Markets were dictating cover with onerous sub-limits and deductibles applied to catastrophe claims, in particular wind and cyclone which was the clients most likely cause of a large loss.

It was RAS’ recommendation to run an insurance broker tender. RAS invited industry leaders in alternative risk transfer strategies to participate in the tender process. The responses to the tender were unanimous; the current structure needed to be challenged and a parametric solution to cover cyclone was recommended by ALL participants including the incumbent. The outcome for the client was a premium saving of approximately $5 million with significantly improved coverage. This was undoubtedly a successful result for client.