A True Story With A Happy Ending
“Why are we getting a 100% rate increase?” asked the incredulous city manager. “Because your loss ratio is more than 100%” replied the BUCA rep. “You’re lucky we didn’t rate you up any higher. Be happy!”
The city, located in deep South Texas, had no choice but to go to bid. They didn’t engage an independent insurance consultant, nor did they rely on their Agent of Record to assist in the process. They did it on their own. That’s akin to self-administered heart surgery while under anesthesia in an otherwise empty operating room.
“Here’s our benefits, match them!” said the city. “And here’s our claim experience too. Let the games begin!”
Alas, no bids were received other than their BUCA renewal offer with the same 100% rate increase. Smugness is infuriating.
That’s when we got a call. “Bill, can you come over and talk to us? We got a problem!”
I met with the city manager and reviewed their RFP claim data. It took only a few minutes. I knew where to look and it was easy. “Yes, I would be pleased to help manage a RFP redo” I offered. “And my guess is you are going to get competitive bids this time.”
It was easy to verify the claim data was real, but the purported loss ratio certainly wasn’t. The carrier’s actuary missed something. We didn’t.
In the second go around the RFP process produced far different results. Multiple vendors submitted proposals. The incumbent carrier sheepishly came in with a pass. “Please forgive us as we have sinned” was hoarsely whispered off the record.
The city dodged a bullet, and the plan survived for another plan year. The BUCA was forgiven and the marriage continued.
This occurred some years ago. I was reminded of it recently when it happened again. Same BUCA, same scenario, same happy ending.
Knowing how to underwrite risk is essential, the most powerful weapon an insurance advisor has when determining if a renewal is fair, accurate and resonable.
