"You're welcome to send us some quotes." - Buyer …"Yeah, no thank you." - Me - Blocking of Markets - What is it? Why is it important?

Buyer: "Just let us know what you need to get us some quotes."

Me: "Yeah, no thank you."

Now I don’t mean to come off as rude, but this is something I’ve heard so many times over my career and still regularly, that it’s impossible to count. I understand the reasons why someone would say this, but it’s not in your best interest as a business owner or decision-maker. This is a great example of the type of flawed logic I still see on a regular basis.?

In high-risk industries with a limited marketplace, it will never make sense to me to engage multiple agents to get you the best terms and pricing.

In order to explain why this is bad for you, we’ll have to dive deeper into how the insurance marketplace works.?

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Blocking of Markets

Typically, when I ask folks if they know what the blocking of markets is, a large percentage of buyers and decision-makers say yes, but they cannot fully?explain to me what this concept is nor why it’s important.?

They will typically say something like "Yeah, it's where I have to sign letters or else you can't give me a quote. It usually pisses off my current agent and then I end up having to sign other letters to fix it." They'll even throw their hands up and exclaim that they understand dismissively, too afraid to ask any more questions in an effort to not look weak or seem vulnerable. After all, I'm a salesperson for God's sake in their office, trying to sell them something. Why would anyone want to appear weak or ignorant in those circumstances? I kid, but it can happen from time to time. The psychology of the sales process is a crazy thing, but I'll tackle that another day.

Basically, the short version is this. An insurance company will only provide one quote for your business, and it will go to whoever was the first agent to send them what they consider to be a "complete" submission. Anyone who comes after will be told "Sorry, we've already received a submission on this account."

Now, we'll move on to the more detailed version.

Fundamentally, the insurance marketplace operates completely differently from any other marketplace in the WORLD! It’s not a free market, where anyone can go anywhere and get a product for a price. That’s just not how it works. I wish I could give you a satisfactory answer as to why the marketplace operates in this manner, but the truth is I’ve never received one that I believe to be adequate. So unfortunately it is what it is and there's nothing you or I can do about it.

The blocking of markets works like this. Let’s say you as a business owner want to get the best pricing and coverage available for auto insurance because that is the biggest driver of your total cost of insurance. As a result of this desire, you engage two agents to go out into the marketplace and secure quotes for your insurance program. You send both agents loss runs, exposure data, completed supplemental applications, driver and vehicle lists, etc.

You have an existing relationship with your current agent whom you've been with for a while. Already this agent is at a significant advantage whether or not they have done a good, great, or average job over the years. They have all of your historical data. If they've been with you long enough, they also have access to the most vital item in your renewal process, your loss runs. Let's not get ahead of ourselves though.

So your existing agent or as it's referred to in the business, "the incumbent," is at an advantage and they get out into the marketplace first, not because they are better than anyone else, but simply because they had the information first sometimes days, weeks, or even months before the other agent. Okay, so now let's say you get another agent involved and send them all the requested data. They now get out to the marketplace. You really like this agent. They have a host of resources at their disposal, claims support, risk control, marketing specialists, benchmarking tools, etc. They are young and hungry, but also seem extremely competent and up to the task.

They start sending submission after submission in the marketplace and get notified from carrier after carrier that they have already received a submission from a previous agent and cannot provide a quote. They are "BLOCKED" everywhere. Now let's say this new agent has exclusive access to a particular carrier whose been writing auto insurance in your state rather aggressively over the past six months. Since it's exclusive they cannot be blocked. They receive the submission and begin working on it anxious to win the deal.

Now fast forward to a week before your renewal date. You've sat down with both agents independently and now all you can look at is pricing. Let's say the incumbent agent brought in a better price compared to the other agent. However, the other agent brought in a slightly higher price, their terms of coverage are much broader and will ultimately protect your balance sheet in the event of a claim. How do you get the best of both worlds?

The short answer is you can't. You have unintentionally, if you didn't know about this concept, subdivided an already limited marketplace. The carrier offering a better price cannot be leveraged against the carrier offering better terms, because the agents are blocking one another.

How do you ensure this doesn't happen? How do you get the best pricing and terms available in the marketplace? The answer is a broker selection process.

Broker Selection Process

To be continued...

-- Fred

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