Gene108 asked a good question yesterday that is at the limits of my knowledge as I don’t deal with the sales side of the insurance industry all that much, but I’ll try to help:
As a person, who has been handling benefits for a small to medium size business for 17 years, and does not have time to go to companies directly and therefore goes through brokers, what exactly is the relationship between a broker and insurance company?
Is there really a one-on-one relationship or do companies just need a company’s census and they hand out the same quote to any broker who asks for a quote?
Brokers are supposed to represent the interest of the insured or the shoppers while insurance agents represent the interest of the insurance company. There are plenty of insurance agents on the third floor of my building but no brokers anywhere in the building. The basic job of a broker is to give their client good, relevant, professional advice, and then take care of all the confusing crap that is involved in buying insurance.
Some brokers will consistently shop their clients to every relevant insurance carrier in a market. Others will know their market, and know the basic characteristics of their client and then shop through a few relevant options. The ACA world of community underwriting for small group policies means that there is less value in knowing how individual companies will write policies for any particular configuration.
Once a broker receives from their client a company census of who will be covered (including dependents) and the possibility space (cost, network, maximum deductible etc), the broker will start shopping around. The broker will talk with the sales reps to define plan design if the client is a mid to large firm, or for small group/individual, go through a menu of standard options. The sales reps (esp. if they work for Mayhew Insurance) will collect the group census and then promise three improbable things and one impossible thing in order to get the commission. The sales reps will then tell the plumbing team about the impossible condition a week before the policy goes active and then I don’t sleep for a while.
Larger groups may request certain pieces of information from the insurance companies that they are soliciting bids from. They will often ask for a network accessibility GIS report to see how good the network(s) that they are considering is for their actual members. If most of the buyer’s employees live in the central city heart of the network, access will be good even in a narrower network. If the majority or a loud minority live in the boonies, broader networks are probably going to be asked for. Disruption reports will often be asked for from new carriers. Disruption reports are a list of providers and claims/dollars paid for the group in the past two or three years under the current insurance plan and check boxes to determine if the new insurer includes a given provider in the network. This is an attempt to guesstimate how many people would have to change providers if the insurance plan switched.
Once the broker receives a set of quotes with supporting documentation/reporting, they are supposed to filter out the no way in hell bids, and then make recommendations as to what the client should buy. Once the client makes the decision, the brokers continue to support the client in handling all of the admin work of setting up a policy such as getting membership files built, determining payment structures etc.
For the final question, do certain insurers give certain brokers slightly better pricing? There is always a little bit of wiggle room in pricing. I don’t know if the wiggle room comes from keeping a broker happy/favorably inclined or from the fact that a smooth working relationship combined with big brokers bringing in big groups lowers the admin cost. I don’t know.