Companies typically use the request for proposal (RFP) to launch new projects, including hiring a new insurance broker. However, it’s tough to know when you’ve outgrown your current broker, and this particular process can get messy quickly. This post brings clarity to the RFP process while sharing insider tips to avoid common pitfalls. Let’s dive in.
What Is the RFP Process?
Making sense of the RFP process means understanding RFPs first. A request for proposal is a business document that describes a specific project’s requirements and needs. For example, when a company is ready to leave its current broker and team with a new one, it will embark on an RFP process with potential brokers. Here’s how this endeavor typically unfolds:
- Announce a project: Typically, companies use an RFP to announce a project to potential brokers, also known as bidders in RFP terms.
- Describe a project: It generally takes agencies 4-6 weeks to draft a proposal. Start as early as possible, and include a submission due date. This step contains details about the company to help bidders fine-tune their proposals.
- Solicit bids: In a written review, a company requests proposals for a project, asking for information about the bidder’s financial health and stability as well as reasons to partner with that specific bidder.
- Oral presentations: Once a company performs a precursory screening of the bidders involved, the final tier of prospects will give an oral presentation. Bidders tend to take up to two weeks to prepare this verbal presentation.
- Final decision: After reviewing the final prospective bidders, company management will choose the bidder they want to hire.
- Contract award: This part is the final step and results in a signed contract between a company and the winning bidder.
Is It Time to Leave Your Current Broker?
It’s not uncommon for companies to use the RFP process merely to gauge the market. Doing so helps determine whether they are getting enough bang for their buck and having adequate coverage. However, many times, businesses use RFPs to shop around for a new broker. But how do you know when it’s time to leave your current broker? Here are a few ideas to consider:
- Gauge their industry knowledge. Company leaders typically have extensive knowledge about the industry in which they operate. However, your broker should also be familiar with this information—very familiar. For example, can your broker identify current and emerging risks? What coverage do they recommend? Does your industry knowledge coincide with theirs? If you’re the one who has wide-ranging expertise and makes suggestions, you’ve probably outgrown your current broker.
- Pay attention to insurance expertise. Only brokers with solid industry connections, claims expertise, and trending insurance data can offer you the most competitive pricing. How well does your current broker measure up?
- Look closely at market performance. Do your competitors have better insurance? Can your broker provide benchmarking studies to reveal how much you’re paying compared to your peers? Perhaps your broker’s marketplace performance falls flat. If your broker can’t give the side-by-side comparisons you need, it might be time to switch to another firm.
- Consider their communication strategy. Do you only hear from your broker at renewal time, perhaps 30-60 days before the renewal date? Also, do they continue to offer you the same coverage every year? A broker’s communication strategy is very telling, and you can learn a lot from it. If this relationship frustrates you or you’re often chasing them for answers, maybe it’s time to move on.
What Questions Do You Ask In an RFP?
When you decide that a new broker is what your company genuinely needs, the RFP process begins. Here are a handful of helpful questions to ask during this process:
What are my business’s unique risks?
As mentioned, an excellent broker knows the ins and outs of your industry. In short, they honestly “get” you. So, ask potential brokers to place policies according to the unique risks they’ve identified for your company. This strategy will call upon any insider knowledge they possess while giving you a clear view of their expertise and communication style — plus, it’s free advice.
What policies would you recommend?
Some brokers will rattle off standard commercial policies, but you need a more tailored approach. When a potential broker customizes their policy recommendations, how well do they suit your business? How did they decide on those particular policies (i.e., team effort)? This question will pinpoint whether the broker can fulfill their duties and customize a robust risk management plan for your company.
Do you offer additional services?
In an ideal situation, a broker is an extension of your business, offering you sound advice and coverage loopholes. Sometimes, brokers offer extra services, such as claims advocacy, databases, and hard-to-find industry information. These services are usually charged as a package deal or onesie-twosie. Ask directly what services a potential broker offers and how much it will cost you.
What is the firm’s culture?
Learning about a brokerage firm’s inner workings and team dynamics can inform you greatly. Do team members work together to produce cohesive and stable services, or do they offer more of a scattershot approach? Think about this: in the middle of a costly claim, these are the folks that you want to be working in stride with each other, not against one another. Take the time to learn about their culture.
What is the ultimate price?
Naturally, the price tag question is on everyone’s mind. It’s a no-brainer. However, consider how the potential broker presents the ultimate price to you. Do they break down the costs straightforwardly, or are you left trying to read between the lines? Does the potential broker work on commission or fee? Demand clarity, listen for consistency, and don’t settle for less than a cohesive price breakdown.
What Are Common Mistakes In RFPs?
RFPs are often complicated, messy, and exhausting for management teams — but they don’t have to be. Avoid making these five common mistakes along the way.
Mistake #1: Downsizing to a spreadsheet
Spreadsheets work well when comparing straightforward data, such as numbers or figures. They’d likely work great for RFPs, except that this process is highly nuanced. It’s not as effortless as comparing apples to apples.
Unfortunately, many companies condense valuable information into tiny boxes on a spreadsheet and miss crucial data. Spreadsheets leave little room for expanded answers. Remember that you’re not buying a product; you’re teaming with an expert. Consider using another method to compare your RFP responses so you can review all the information.
Mistake #2: Forgoing the vetting process
Shopping for a new broker is more than throwing mud at the wall to see what sticks. Instead, do your pre-vetting work, and find brokers already aligned with your company’s core values. Study up on brokers serving your industry to determine if they’d be a good fit. You don’t want to send dozens of inquiry emails to unfamiliar brokers. (The thought of screening those responses is probably enough to nix that idea!).
Mistake #3: Bypassing references
Insurance ecosystems are expanding drastically. The roles are changing, leaving your network larger than it was a year or more ago. Don’t be shy about tapping into these resources. Ask your circle of professionals if they’ve ever worked directly with a potential broker. What was their experience? Ask for referrals, and reach out to your professional network for advice. This first-hand experience can be invaluable.
Mistake #4: Focusing solely on cost
Sure, the cost is going to weigh heavily on your final decision. Insurance is a significant expense, after all. Plus, price tags are easy variables to compare. Keep in mind that there should be more to your choice than mere money. The lowest bid might not be the best fit for your company. Conversely, the highest price might not be what you genuinely need, either. Leave room for other crucial factors to influence your final decision.
Mistake #5: Rushing the process
If you plan on switching brokers at the end of the RFP process, be sure to leave ample time for the changeover. Most companies launch the RFP process up to six months before renewal time. Typically, the RFP process takes roughly three months, leaving plenty of time to switch brokers if necessary. Before you begin this endeavor, consider all the individual schedules you’ll need to coordinate and plan accordingly.
How Do Companies Review RFPs?
Distributing your RFPs is indeed part of the battle, but the last leg of this process is reviewing the submitted proposals. Here are helpful guidelines to get you through this task successfully.
- Allot enough time: Distributing an RFP can take up to two weeks, while you’ll typically allow up to four weeks for potential brokers to return RFPs. Consider leaving one to three weeks for your team to review RFPs.
- Establish evaluation criteria: Even though your goal is to compare brokers, each firm will highlight different qualities. You’ll need to establish evaluation criteria to compare apples to apples. Try a qualification-based selection, where you evaluate according to the firm’s qualifications.
- Develop a scoring system: Settle on the way to score the RFPs. Perhaps rate them using a points system according to how well the potential broker measures up. For example, allot five points if the broker fits all your requirements and only one point for firms that only meet a handful of conditions.
- Prioritize your values: Pinpoint what core values matter most to you? You might not want the “highest scorer,” per se. One firm’s values might align more with your company’s values, so it only makes sense to team with that firm.
- Facilitate discussions: During this entire process, teams should be talking regularly. An excellent idea is to meet and discuss at each stage in the RFP process. One team member might have a different perspective or call attention to an overlooked aspect. Listening to each team member will help you choose the right broker for your company.
Understanding the details of what coverage your company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you.
Want to know more about business insurance? Talk to us! Please contact us at firstname.lastname@example.org or create an account here to get started on a quote.