In a typical commercial insurance tender process, you would select 2 or 3 brokers in addition to your existing broker and expect each of them to come back with a fair price.

Hoping to get a better price than the others, each broker will approach as many insurers as they can. It’s not uncommon for more than 30 insurers to be involved.

The person who makes the decision on behalf of the insurance company as to whether or not to quote on your business, and what price to give, is called an underwriter.

As unknowns carry greater risk, an underwriter can usually put forward a better price when they have a better understanding of you and your business. This can take time.

If an underwriter discerns that there is a lot of competition with other insurers for the business, then she may be more likely to decide against investing any more time on your business. As a result, you may miss out on a better deal.

Also and as you would expect, in some cases the brokers will go to the same insurer. When this happens, whoever gets there first will dictate the price given to all brokers due to the logging protocol.

In order to avoid this problem, some brokers may ask you to sign a letter of exclusivity for them to review with a particular insurer. The insurer will then ignore all other brokers, and work with that one broker only. This is effective, but does little to eliminate the problem of there being too many insurers involved.

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