How do I know if I'm paying too much?

Everyone wants to get the best deal on everything that they purchase. That means striking a balance between price and quality. With insurance, quality is measured by what is covered and the claims process. A good broker can help show you the difference in quality between policies, but what about price?

Most people stay with one broker and insurance carrier for many years. Their premiums may go up or down over time, but what others pay may have shifted much more. Every few years, if you have an independent agent, you should ask them to market your policy. In my agency, most of our clients are on a three year marketing cycle. This means, that if our client asks or not, we shop multiple insurance carriers for alternative quotes. We also market if the insured asks, or if we feel a premium increase is unjustified.

There is such a thing as over marketing. If you pay more than $15,000 for business insurance annually, your account is usually reviewed by an individual underwriter. This is a real person, with a name, a face and a memory. If you market your account every year, it develops a reputation with those underwriters that quote it repeatedly, and they start declining to quote, or may not put in the time to give you the best pricing. This goes doubly so in niche writing areas, like social service, fire protection, security, et cetera.

Unless you have an agent that only writes with one carrier, most independent brokers will be able to bring you three quotes. Your independent broker is your advocate and your adviser, you need not sever that relationship to check to see if you're getting the best deal. Now, if you are unhappy with your broker, that is a separate discussion.

If you have a large account (say over $50,000 in annual premium) and you have some losses every year, there is another quick way to see if you are getting a fair deal. Check your loss ratio, that is divide total losses by total premiums, over a few years. If the ratio is under 40% you may be due a decrease, if it is 40-60%, your coverage is priced about right, and if the loss ratio is over 60%, your coverage may be underpriced. Now that is only a rule of thumb and there are many other factors which enter in to this. Also, it's not a good rule of thumb for lines which only have large, catastrophic claims, and very infrequently, like umbrella coverage.

With just a little work, you can make sure you get the best deal.