Condo Media - April 2010 - 18

ASKED & ANSWERED

Caveat Emptor & Venditor

Q A

Shopping the Association’s Insurance Policy

QUESTION: We are planning to put our association’s master insurance policy out to bid this year. Is it permissible to have more than one agent solicit bids from carriers on our behalf? ANSWER: Common sense, professional etiquette and administrative efficiency rather than statutory or other requirements dictate the answer to this question. Not surprisingly, association managers and insurance agents differ on the advisability of involving multiple agents in the RFP process.

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Agents who have represented associations for a long time may become complacent, managers say. Knowing competing agents are involved may keep the association’s agent “sharp” and encourage him or her to “work a little harder” on your behalf, suggests Hugh Shaffer, PCAM, senior manager at Massachusetts-based G&G Management Company. The agent may make a few additional phone calls, negotiate more aggressively and generally “push a little harder” to make sure the association gets the best possible deal, he believes. Some agents bristle at that suggestion, however, insisting that they already work hard for their clients. They say they may be more likely to be offended by the competition than motivated by it. In the small universe of community association insurance, virtually all the leading agents write for all the carriers, notes Bernie Gitlin, president and CEO of Global Insurance Network in Needham, Mass. So, in most cases, associations are unlikely to benefit from involving multiple agents in the shopping mix. When agents do agree to compete for an association’s business, they want to know that the association is prepared to move if the agent finds a better insurance deal for them. If the association is planning to use the competing bid as a lever to extract a comparable offer from their incumbent agent and existing carrier, then, Gitlin says, he’s not interested in doing all the work required to obtain a bid. In fact, if he knows the association is shopping with other good agents, who will almost certainly approach the same carriers he would approach,

Gitlin says, “I’ll often bow out. I don’t need the exercise,” he explains. “Either I can bring a little more to the table because of my experience in the industry or because of my longstanding relationship with the association,” he continues. “If not, I don’t want to play.” Boards that decide to work with multiple agents should do so carefully, industry executives emphasize. “You must manage the process or the process will manage you,” Shaffer cautions. Carriers typically will not bid on an association policy that comes to them from two different agents, which effectively closes that market to the association. To avoid that risk, association boards should give their agents a letter identifying the carriers they are to contact, and making it clear that they are not to contact any others. Managers say they will usually have the incumbent agent select a specified number of carriers first, and then allocate the rest of the carriers among other agents. Gitlin thinks there is a better way for associations to make sure the bids they receive reflect the entire range of market opportunities. Instead of shopping through multiple agents, he suggests that the association should direct its agent to cover the entire market, and have the agent submit a market report. That report should provide details of all the companies the agent has approached and should summarizing the bids they have submitted. “If board members don’t trust the agent’s report,” Gitlin says, then clearly, “they don’t trust their agent and should find a new one.” CM

CONDO MEDIA • APRIL 2010

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Condo Media - April 2010

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