It is extremely common in commercial property management to be asked to get quotes for a given job. In most cases, this is a prudent thing to do, as the best way to determine whether you are getting a job done for a fair price, is to see a variety of prices. This is a universal truth, BUT when it comes to insurance its more complicated.
To be clear on this process, you must first understand the roles of the broker and insurer. For the most part, the companies/people that property managers deal with, are brokers (BFL, Capri, Marsh, etc.). The brokers, act as “middle-man” to sell insurance policies from insurance companies, the “Insurers” (Intact, IBC, AON, etc.). To give some context, although there are tens of thousands of insurance brokers in the country, there are very few Insurers in Canada: roughly 50. Of those roughly 50 insurers, less than 10 specialize in commercial properties, and the likely candidates to use are closer to 5. Consequently, when an insurance broker sells you on their ability to get a cheaper premium, it is important to know that they are fishing out of the same small pond.
In short, the broker may appear to be providing a “quote”, but in reality, it is the Insurer providing the policy.
The implications of this are more complex when you consider that:
- When asked to quote, Insurer A will generally provide Broker A and Broker B the same price.
- Note: This is largely true, but depending on the broker, some insurance companies will reduce their premiums slightly based on volume and relationships.
- An Insurer will not quote the same property twice to two different brokers for the same renewal, and overtime they will refuse to quote on the same property if they don’t get the Policy.
With this in mind, if we are asked to find quotes, knowing that Broker A has already “gone to market”, Broker B will likely have a difficult time getting quotes if the first broker was diligent in asking an assortment of Insurers. In addition, if you had gone to market a few times in recent years, it may be difficult to get Insurers to respond to requests if they don’t think there is a likelihood of them getting the policy.
To summarize, insurance is tricky, and getting the lowest premiums is only part of the equation. As property managers, we need to be cognizant that on the other side of the equation is the policy’s coverage, and ensuring that buildings are properly covered in case of a loss should be our primary concern.