Our industry has been compared to a three-legged stool--held upby carriers, brokers and clients. All three legs are intended towork in harmony so that our business remains healthy and vibrant.Competition is at the heart of our vibrancy, along with new revenuegrowth and the ability to provide clients with value.

Over the course of the past several years, however, an entirelynew perspective has entered the competitive arena. The firms thathave embraced it will prosper, while those that don't will sinkinto the abyss of price and commodity sales. This new perspectiveis the ability to differentiate based upon a quantifiable valueproposition.

There are several reasons why this new business style has gaineda tremendous amount of momentum inside the brokerage/carrier/clientrelationship. Here are just a few:

o The successful brokerage firms have evolved into substantiallymore than just insurance sales and service organizations.

This "Brokerage Darwinism" involves the ability to provideresource capabilities. The ability to deploy these resources andquantify their impact is critical to the consultative brokeragesales process being adopted by these quality firms.

o Carriers are beginning to see their resource capabilities as a"profit center" when offered to their broker representatives.

While in the past, services such as loss control and claims wereconsidered overheads, astute carriers are repositioning assets todemonstrate a return-on-investment.

o While large clients have understood this for some time, nowthe middle-market buyer is awakening to their "True Cost ofRisk."

These buyers are beginning to understand that in many cases, thesmallest cost of their risk is the insurance premium. They arelooking for representatives who can help them reduce their costs inmany other ways.

Quality brokerage firms are using the TCOR technique coupledwith a broker of record letter request as their main competitivestrategy for these reasons:

o It allows them to compete on a highly profitable basis withoutwasting overhead on marketplace submissions.

o These brokers are able to select the rightprospects/clients--those who understand and desire a valueproposition.

o They are better able to build relationships with carriers thatoffer a value proposition which aligns itself with clientsolutions.

For the first time in the history of our industry, astutebrokers are able to take the focus off the price of the commodityand put it back where it belongs--on their ability to help clientsreduce costs that impact their balance sheet.

However, a dark shadow still looms inside our industry,weakening the strength of the three-legged stool. What is it?

It is the reluctance of some carriers to wholeheartedly endorsethe "Brokerage Competition Model" and the broker of record lettermethod of competition.

Unfortunately, some carriers do not understand the importance ofthe BOR strategy for those brokers who know how to create a valueproposition.

In the past several months I have heard a number of brokersexpress frustration in the responses their improved business styleis receiving from their carrier partners. Here is what they aresaying:

o "Our firm has an 80 percent hit-ratio on our broker of recordletter sales, yet some of our carriers are complaining about seeinga lessening of our submission flow."

o "We recently were appointed the broker on a national accountthrough a BOR. The carrier resisted the appointment because it wasunderwritten in a different territory."

o "Several carriers have expressed disdain for the broker ofrecord method because it does not count for 'new business' on theirbooks."

It is time for all of us to climb onto a "platform of value."The outdated commodity competition method will continue to make allparties victims of the historical insurance cycles. These cycleshave nothing to do with the creation of client value--they aresimply a function of commodity supply and demand.

The astute brokers who have adopted the consultative brokeragemodel are learning to compete with immunity to the pricing cycle.It is time that carriers follow these examples to get closer totheir most profitable accounts. These accounts and their brokersunderstand the important difference between price, cost andvalue.

In the event a forward-thinking insurance company intends toposition itself in the mainstream of these changing client andbroker expectations, here are some of the ideas they must considerand adopt:

o Understand changing buyer expectations.

As clients become more financially astute, they demand moreservices from brokers. Carriers must position their resourceofferings to work in tandem with those of their broker/agentrepresentatives so that a transparent partnership will exist.

o Break down territorial barriers.

Buyers do not consider underwriting territories when selecting abroker. With the seamless adoption of technology, clients andbrokers are able to do business across geographic boundaries.Underwriting territories are not part of the equation, but merelyaccounting methodologies.

o Select agents/brokers who understand value.

While there are thousands of licensed insurance agencies, thereare a finite number of firms committed to providing resources and aTCOR value proposition. Carriers should focus their efforts onthese firms, as they will provide an extremely high hit ratio.

o Expect more from broker/agent representatives.

When a broker/agent competes on a brokerage selection basis,they must demonstrate a superior service, resource and costreduction formula--the same features that allow carriers to reducetheir distribution costs. Carriers should work closely with thebroker to harness this distribution and acquisition costreduction.

o Understand their ability to provide ROI.

Many carriers list a great number of features, such as superiorloss control, claims handling and specialty resources. Once acarrier understands how to quantify its impact, however, they arein a position to establish a long-term relationship that is notbased on the price of the commodity. They become part of theclient's business operation and cost reduction formula.

o Refocus the message to agents/brokers and clients.

Successful carriers must understand that their bestagent/brokers are changing their business styles. While coveragesand stability are still important, in a softening marketplace itbecomes about differentiation through cost-reduction resources.These resources and their quantifiable impact should become thehallmark of a carrier's marketing materials and message.

The brokerage selection model is rapidly becoming the exclusivecompetition choice of quality brokerage firms and regionalagencies. With its high hit ratios, lower acquisition costs andsuperior differentiation, the firms that have adopted it arereporting tremendous results.

It is time that the third leg of the stool--the carriers--joinsclients and brokers in making this process the cornerstone of valuein our industry.