Marketing of Renewals – A Discussion Worth Having

The question of whether or not to market a renewal is one that tends to generate strong feelings from both retail agents and wholesale brokers.  Yet discussing the topic, either on a specific or general basis, is something agents and brokers often dread or even avoid. Deciding whether or not to market a renewal is an important consideration for any particular piece of business. In addition, a retail agent’s or wholesale broker’s general position on the issue says something about their company culture and brand – two very important considerations when choosing a business partner. For retail agents and wholesale brokers alike, marketing of renewals is a discussion worth having.

It is surprising just how much business I have taken over simply because the incumbent wholesale broker did not want to market the piece of business or book. Still, as a starting point, I think most of us would agree that refusing ever to market renewals is not the correct stance to take. There are just too many good reasons why it might make sense to market a particular renewal – some of which have ethical considerations. So the question is not so much whether or not to market renewals, but when and to what extent it is appropriate to do so. To answer that question for any particular renewal, I think we first need to consider the primary pros and cons.

Pros:

• Increases the chances of getting the insured the best terms and conditions available given their particular risk profile.
• Gives the retail agent coverage options to present, allowing them to demonstrate the effort put forth on behalf of their client and solidify the relationship.
• Protects the business for the incumbent retail agent and wholesale broker because likely carrier contenders will have been approached.

Cons:

• Marketing typically results in lower premiums, which means lower revenue for the incumbent retail agent and wholesale broker.
• Marketing creates additional work for the incumbent retail agent and wholesale broker.
• The lower premium that typically results from a marketing effort means less profit margin for carriers, which in turn can ultimately impact their product line stability.
• Moving business creates a potential gap in coverage.

Deciding whether or not to market a renewal ultimately comes down to balancing the needs of the retail agent and wholesale broker. Sounds easy, right?  If each of the pros and cons above affected each party equally, it actually would be an easy choice. But as we look a little closer, we see that some of the pros and cons affect each party differently, at least in the short term. That complicates things.

On the one hand, both the retail agent and wholesale broker have a financial incentive to keep premiums and revenues from decreasing unnecessarily. Both are incented to take reasonable measures to protect and stabilize any piece of business; both are incented to avoid unnecessary E&O exposure. On the other hand, the majority of the additional work necessary to market a renewal is typically done by the wholesale broker. The wholesale broker is also responsible for dealing with underwriters who may be upset because they feel their terms/conditions and pricing were made to be more competitive than they needed to be. It is the retail agent, however, who needs to provide coverage options and demonstrate effort on behalf of their insured.

So the “right” decision about whether or not to market a particular renewal really depends on a realistic assessment of the overall situation and consideration for the impact of the decision on each party.

That takes a conversation.

As for the position retail agents and wholesale brokers take on the issue in general, this is a discussion that the two parties should have sooner rather than later. After all, seeking out and partnering with organizations that take a similar approach to the business is an important part of developing a stable book and business. As I pointed out in an earlier article, It’s The Quality Of Our Customers That Counts, it has been a big part of our success here at Ethos.

Struggling with your wholesale broker’s position on the marketing of renewals?  Give Ethos a call.

Ethos Insights:

• The decision of whether or not to market any particular renewal is not only an important consideration for any particular piece of business, but also a meaningful reflection of an organization’s culture and brand.
• It is important to consider the business impact on both parties when deciding whether or not to market a renewal.
• Seeking out and working with like-minded retail agent customers has been a key to Ethos’ success.