Just like most of you, I live in a town that has to purchase various forms of commercial insurance. The goal is for the town to create a fair bidding process for qualified insurance brokers to bid based upon the specifications provided.
To accomplish this, Municipalities and Governmental Agencies use what is known as a “Sealed Bid” process where the bidders submit a sealed envelope that no one can tamper with. We understand that this is a fairly common practice.
Unfortunately, this does not enable the town to clearly demonstrate that it ran a fair process, and on occasion towns have broken the rules in awarding sealed bid business.
With the best of intentions this method lacks any form of transparency and discourages the best brokers from even participating in the bidding process.
The result is increased costs and fewer qualified bidders.
Traditional RFP’s in the Commercial Insurance business done “the old fashioned way” produce a success rate of 15% or below on average for incumbents, and 10% or less for non incumbents according to several of the worlds largest insurance brokerage firms. As a result, these world-class firms decline to deploy their top talent on bid business, as the success rate is so low.
The solution is clear, as so many other industries have learned. Use technology in concert with a high level of subject matter expertise, and then invite the best and brightest to compete on a level playing field.
Not only does everyone win but also, no one can question how the successful bidder won the business.
In over 4 years of running commercial insurance auctions, our statistics show the incumbent retains the business close to 50% of the time.
Buyers of commercial insurance have a fiduciary responsibility to obtain the best coverage and service at the best price on behalf of their employer. The buyer of insurance within an organization must be able to demonstrate that the interests of the company were placed first. Commercial insurance auctions accomplish this.
Sadly, the town next to mine ran a “Sealed-Bid” process since the beginning of time. They used the special “tamper proof” envelopes to accept the bids. Somehow this process resulted in the same winner every year. Ultimately they found this winning broker was not sending the towns premiums to the insurance companies, he was keeping them.
The rest is history…