Games Brokers Play – A True Story

“Those who have data win. Those who have good data win a lot. Those who have real time data win all the time” – John W. Richards Jr, M.D.

By Bill Rusteberg

It continues to amaze me employers continue to be hoodwinked by their trusted brokers even when confronted with the truth. Their duty of loyalty to their broker-of-record remains rock solid.

A favored time honored tactic of commission driven insurance brokers is to dominate the chain of custody of plan claims experience. As “location, location, location” is to real estate, “information, information, information” is to insurance.

Chain of Custody

“Those who have data win. Those who have good data win a lot. Those who have real time data win all the time.”

Recently a large regional brokerage in deep South Texas, a well respected member of the community, widely known for their community involvement and good work, found themselves in the uncomfortable position of defending and retaining their control of an existing, long time client. The client, frustrated with ever increasing health care costs, sought out competitive proposals from local brokers anxious for the business.

Alas, the client did not have claim data. Upon requesting their claim information from their trusted broker they were told “WHY DO YOU NEED IT!” and “Ok, we will try to get it from the insurance company, but you must realize that due to private health information (PHI) they probably won’t want to give it to us (you)!”

And so the information game begins. The chain of custody is tightened and locked down.

The client, not knowing any better, simply tells the hordes of disruptive, hungry insurance brokers that the claim information may or may not be available any time soon, but “do the best you can do and get us some good quotes!”

Meanwhile back at the ranch, the incumbent broker, a stellar, well respected pillar of the community begins locking up the market. Armed with detailed claim information provided by the carrier, the brokerage sends out a complete Request for Proposal packet to all the major, and minor insurance carriers known to be active in this particular market.

Days later, becoming a little bit frustrated with the insistent demands for more information from commission crazed, obnoxious and persistent insurance brokers, the employer calls their agent and says “Look, the boss is getting a little pissed and wants to know when the hell you and the insurance company are going to get us the claim data we asked for two weeks ago!”

Within a day the broker provides what appears to be good, detailed, up-to-date claim experience which is then sent to all the local brokers tasked with the “Get Us A Competitive Bid” project.

Too late. Market is tied up. Except for one or two sources whose loyalty lies with competing broker Jones who in the past has placed a large amount of business with them.

“Hey Jones, got your claim data. Are you sure it’s complete? I got claim data from the incumbent broker and it’s different.”  

“You are kidding me, right?  says Jones, “Send me the information the current broker sent you so I can compare! I am going to bust him!”

And so, the sad ending to this true story illustrates a common practice within the insurance brokerage community. Agent Jones shows the client the difference in the claim data.  The report showed the date it was prepared as well as the date it was received from the carrier by their broker. It was obvious the broker had the information when he said he didn’t. The trusted broker lied to his client.

“Your own broker is screwing you around! He has purposely withheld your proprietary claim data while you are trying to obtain competitive quotes. He has locked up the market so no one can compete for your business.

He now has the keys to the kingdom and can load his proposals at will with enormous commissions. Why not fire that SOB and assign me your Agent of Record. As your agent I won’t ever play these games!”

“Thanks Jones, but our agent has been with us for 15 years. We like him a lot. I play golf with him every Saturday. His wife and mine are best friends. Besides, his father is one of our biggest customers. But thanks for your help. Look, next year I want you to come back and compete for our business.”