“As an outsider looking in and not having all the political implications and considerations that board members face, I’d like to give you our perspective and advice for consideration on your choices.” – Greg Klement
The 2015 Klement Letter to the Brownsville Independent School District complains of unfair competition. It lays out a seemingly plausible case of unfair and deceptive trade practices as stipulated under Texas Insurance Code Section 541.054.
The Klement Letter exposes age old problems insurance brokers face in bidding on political subdivisions that include bid rigging (locking up the market prior to the start of a public Request for Proposal process). This effectively eliminates competition or at least reduces the number of markets a competing broker can approach. Locking up the market almost always results in significantly higher costs including egregious loading up on agent commissions. The Klement Letter opines a stark difference between the incumbent’s management fees totaling $179,580.52 versus Klement’s proposed fees of $15,000 (fees may be in addition to commissions).
The Klement Letter also questions the role of the broker placing the business versus the consultant making the recommendation. It appears the letter writer alludes the broker and the consultant were one of the same. If that is the case, recommending oneself while assuming the dual roll of consultant and broker seems irregular at best.
Smart brokers size up opportunities before committing time and resources responding to a public RFP. Their discovery process includes a review of the political landscape and past procurement practices. In the case of the BISD, prospective brokers will be hard pressed to garner enthusiasm about spending time and money chasing this windmill.
