The Hidden Risks of Annual Insurance Shopping for Nonprofits
As a nonprofit leader, you’re constantly seeking ways to optimize your resources and ensure your organization’s longevity. Insurance is a crucial part of this equation, providing the safety net that allows you to focus on your mission. However, the common practice of shopping for a new insurance policy every year, or periodically using Requests for Proposals (RFPs), might be more harmful than beneficial. Let me share why this approach needs reevaluation and how finding the right agent can transform your insurance experience.
The Pitfalls of Frequent Shopping
In my experience as an insurance agent specializing in nonprofits, I’ve encountered many executive directors and finance officers who proudly state that their agent shops for new policies every year or that they conduct RFPs regularly. This method, while seemingly diligent, has hidden risks in today’s insurance landscape.
Limited Market for Nonprofits Insurance carriers that cater specifically to nonprofits are already limited, and the market is tightening further due to industry challenges. Frequent shopping can lead to these carriers receiving multiple submissions from your organization over time. What many don’t realize is that these carriers keep detailed records of all submissions, tracking the completeness and outcomes.
Incomplete Submissions A survey conducted by a third-party data and analytics firm, which I collaborate with, revealed a startling statistic: 75% of insurance submissions are incomplete. Missing applications, lack of loss runs, or other vital information means these submissions can’t be properly evaluated. Incomplete submissions are often used strategically to block other agents from accessing the market or to give the illusion of thoroughness. Unfortunately, this practice can backfire when underwriters, who see repeated incomplete submissions, deprioritize your organization.
Underwriters’ Perspective
The insurance industry, like many others, has been affected by staffing issues exacerbated by the COVID-19 pandemic. Many seasoned underwriters have retired or moved into management roles, leaving a gap filled by less experienced professionals. These newer underwriters are under pressure to work efficiently, prioritizing submissions where they see the best potential for a successful match.
Efficiency and Prioritization Given the volume of submissions, underwriters are more likely to prioritize organizations that consistently provide complete, high-quality submissions. If your organization has a history of incomplete submissions, your applications might be moved to the bottom of the pile, regardless of your current agent’s efforts.
Choosing the Right Agent
Let’s draw a parallel with real estate to better understand this dynamic. When buying a house, do you solicit multiple real estate agents to bring you properties, or do you select one agent who understands your needs and negotiates on your behalf? Most likely, you choose the latter for its efficiency and personal touch. The same principle applies to selecting an insurance agent.
Building a Trustworthy Relationship By partnering with a single, reliable insurance agent who understands your nonprofit’s unique needs, you create a stronger position in the insurance market. This agent can ensure complete and accurate submissions, represent your organization’s best interests, and help navigate the complexities of the industry.
Real-World Example: A Case Study
Consider the case of “Helping Hands,” a mid-sized nonprofit focused on community outreach. For years, Helping Hands followed the common practice of annual shopping for their insurance needs. Their agent would send out multiple submissions each year, many of which were incomplete. This resulted in a patchy relationship with insurance carriers.
When a significant claim arose, Helping Hands faced delays and increased scrutiny when looking for new options because their history showed frequent, incomplete submissions. Realizing the inefficiency, they decided to switch to a single trusted agent. This agent took the time to understand their operations, ensured all submissions were thorough, and maintained strong relationships with underwriters. As a result, Helping Hands secured better coverage at a more competitive rate and experienced smoother claims processing.
Informed Decision-Making
The key to success in today’s insurance market lies in education and strategic partnerships. Nonprofits should move away from the mindset of frequent shopping and instead focus on finding an agent who offers:
- In-depth Understanding: Knowledge of your nonprofit’s specific risks and needs.
- Complete Submissions: Ensuring all necessary information is included.
- Strong Relationships: Building and maintaining positive relationships with underwriters.
By becoming a more informed buyer and working with a dedicated agent, your nonprofit can navigate the complexities of the insurance market more effectively, ensuring better coverage and long-term benefits.
If you have any questions or need assistance with your insurance strategy, feel free to reach out. My goal is to help you become a more educated and confident insurance buyer, setting your nonprofit up for lasting success.
About the author
Drew Colwell is a commercial insurance agent and risk manager who specializes in working with nonprofit organizations, healthcare providers and other human service related businesses all over the US. His contact information is below.
Phone: 406-204-3666
Email: andrewc@wafdinsurance.com
LinkedIn: https://www.linkedin.com/in/drewcolwell/