Friday, March 14, 2008

Save The Baby When You Toss The Bathwater

Its amazing to observe how often companies will decide to replace a vendor without considering an existing carriers capability to provide similar services or products much less the flexibility in pricing a long term relationship affords an insurance carrier.

Often brokers and consultants who are revenue and acquisition driven pursue make recommendations to change vendors when it serves their interest not their clients. Where service or problem solving skills fall short at a brokers firm the path of least resistance is often to change carriers or vendors.

Here are a few key points for employers to consider before changing carriers;

  1. Ask who benefits from the sales pitch as its detected. You need consultative problem-solving skills from an intermediary not pitches.

  2. Meet with your incumbent and price the same alternatives.

  3. If you have built up a track record with a health insurer and matured your run out changing insurers will result in another first year renewal where you are again facing both trend and a mature adjustment. It will be tough to negotiate that down with a new carrier but with your incumbent its far easier.

  4. Continuing to change carriers will limit the markets who will consider you in the future and limit your options. Carriers just decline companies that shop and change annually.

  5. Try to resolve issues directly with the incumbent before leaving them. Counseling is always cheaper than divorce. If your broker cannot or will not setup a meeting with the people who can resolve a problem that should be a telling signal to you that perhaps you need a new intermediary.

I spoke this morning with a client who had entertained a pitch from a competing broker suggesting a carrier change. The client has been with their health insurer for 4 years and has been treated very well and we were successful in negotiating a 13% renewal down to 4.5%. All of the plans being suggested are available through the incumbent without a carrier change. Yet that did not prevent a recommendation that the baby be tossed with the bath water which is never a good idea.

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