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December 15, 2021

Changing your insurance and employee benefits broker

As rates rise, is now the right time to replace your underperforming broker?

Most companies are reluctant to change their insurance and employee benefits broker because of the perceived hassle. In fact, finding a more capable broker is less onerous than you might think. With insurance and employee benefit costs rising sharply, now may be an opportune time to consider a new partner.

What leads a client to change brokers?

Typically, clients make a change when they lose confidence in their broker. This could be due to a strategic lapse, such as failing to anticipate where the market is heading, the lack of a strong partnership with insurers, or an inability to secure the best coverage at the best price.

Or, it could be something as simple as lackluster service, which results in clients feeling unimportant or unappreciated. I can’t tell you how many times I’ve heard a CFO or CHRO say, “My broker takes too long to get back to me.” In other instances, a change is warranted because the firm outgrows their broker. The business grows too large, and the incumbent lacks the technical skills or ability to help control costs at a rapidly growing firm.

Easier than you think

Clients often times wrongly assume that changing brokers will negatively impact employees or their insurance or benefits program in the middle of a term—and that’s just not true.

When you change your business insurance broker mid-term, there is little negative impact on the program or employees. The current coverage remains untouched, and the new broker begins to represent the client immediately with their existing carriers. 

The only area for consideration is claims. If the existing broker is involved in claims resolution, the new broker will have to assume this responsibility. Marsh McLennan Agency has been hired on numerous occasions to resolve complex claims because other brokers seemingly did not have the expertise.

As for employee benefits, the same is true—the employer’s programs remain unchanged and the new broker immediately takes over, including dispute resolution. Two minor issues that can be easily handled by the successor broker is redirecting calls to the employee claims center and communicating program details during open enrollment.

The cost of not changing

Finance and HR professionals are exceptionally busy, so they often tolerate unacceptable broker performance. However, changing in the middle of a policy term has several key advantages. 

First, the new broker will have time to familiarize themselves with your program. That can be a significant advantage as you head into renewal negotiations. Second, the successor broker can have an immediate positive impact—an improvement in the employee/user experience that will reflect well on executive managers overseeing these programs. Third, technical policy issues or service issues can often be fixed right away by a new broker, who is usually highly motivated to demonstrate immediate value and validate the employer’s decision to change teams.

Perhaps most importantly, there is no financial cost to changing in the middle of the term. Many business insurance brokers will service a new client without payment or additional commission until they are compensated at the next renewal cycle. With employee benefits plans, the new broker gets paid after the insurance company feeds are transferred. That takes effect about two months after the requested change. It’s customary for an employee benefits broker to work for free during that period. 

How to break up with your broker

Breaking up is straightforward, and the successor broker does much of the work.

Clients initiate the process through a form letter known as a broker of record (BOR) letter. The industry recognizes this as the vehicle for changing brokers. The client prints the BOR letter on their company letterhead, signs it and forwards it to the new broker. On behalf of the client, the new broker submits the BOR letter to the client’s insurance companies. Most carriers have a five- to ten-day “Waiting Period” until the broker change is effective. This gives clients a grace period in the event they change their mind, which happens infrequently. Often times, the successor broker modifies the BOR letter to waive the waiting period.

Once the insurance companies are notified of the pending change, they typically call and email a copy of the BOR letter to the successor broker. It’s professional courtesy (but not required) for the client to inform the current broker of their intent in advance of the BOR letter being sent to the insurance companies. The good news is that the entire process can be wrapped up in less than a month.

When a relationship turns sour, there’s no need to suffer through it. Brokers like Marsh McLennan Agency are to ready to deliver exceptional client service and strategic counsel. The most important step for any company is simply reaching out.

For additional guidance about moving to another broker and to learn more about MMA’s solutions and services, contact us today.