When evaluating athletic insurance partners, it is important to know that there are about 20 different insurance CARRIERS that are active in the collegiate athletic insurance market. Most insurance brokers have access to a handful of these carriers (some upwards of 15) and approach them for quotes on a given opportunity. The key here is that It is uncommon for an insurance carrier to release more than one quote per school. Therefore, the broker that is FIRST to bring an opportunity to that specific carrier is likely to be the only broker that will be allowed to offer that quote.

What this means to those of you who are forced into a public bid/RFP setting, is that there are many, perhaps better, athletic insurance brokers that are essentially “blocked”  from obtaining quotes from the more competitive insurance carriers simply because they were not the first in the door with the necessary information. This is all too common in athletic insurance and can be prevented by simply crafting your RFP to select the best broker based on their experience, abilities, added value and their access to various markets and NOT based on price. In fact, broker services bids usually don’t even ask for pricing at all. Rather, once the selected broker is awarded the contract (based on what they can do for you OUTSIDE of the cost), then he/she would begin to solicit quotes from all their available insurance carriers allowing you to then select based on price or whatever criteria you deem important. This will eliminate the risk of an inferior broker/bidder locking up the best insurance carrier quote, forcing you to select them despite  their lack of ability to provide the same level of service that other brokers (without that low quote) are able to bring your department.

This method of selecting a new athletic insurance partner is popular amongst private institutions that are not restricted to the same state purchasing guidelines that public entities are, but I have seen this strategy applied at many public institutions as well. It may require a bit more effort upfront to restructure your RFP wording, but it can be done within state purchasing guidelines as well.

What are the key elements of a successful athletic insurance program that you may be missing if forced to take the lowest premium bid through a traditional RFP process?

Service

I know, it sounds silly, but knowing that your broker will answer your call at 8 a.m. on a Saturday morning is important

Value-added services

Brokers often provide free services as a way to differentiate themselves from the pack. These can include primary insurance assistance for your athletes, primary insurance verification, client/claims portal, insurance ID cards, etc. The best partners will bring a slew of added value to your program.

 Stability and a long-term partner

Taking the “price” out of the equation promotes a sense of commitment to the partnership, inciting more collaboration and strategy on ways to better your program long-term- without the fear of the partnership ending the following year over a $100 difference in premium. And yes, that happens.

Carrier “Credit”

Carriers in this space keep tabs on the frequent fliers in the annual RFP arena. If a specific carrier has invested time and effort into underwriting a couple of years in a row and has been unsuccessful for one reason or another, they become reluctant to even pursue a quote the next time that program goes out to bid. So while you think you may be casting a wide net with a public RFP, in reality, you are limiting your carrier options each year.

There is no doubt that the COVID-19 pandemic has impacted collegiate athletics- particularly your finances. With 2021 around the corner, it is going to be important to be financially resourceful and keep an open mind to new ideas. How your athletic insurance broker is compensated is one of those ways.

The standard method of broker compensation in the accident insurance space is by way of the carrier paying a percentage of the premium directly to the broker after the institution pays the premium. The exact percentage varies by type of policy, size of policy and carrier, but a broker typically earns around 10% on accident medical insurance.

Let’s take a closer look at how an insurance carrier underwrites your annual premium. First, the underwriter considers your paid claims totals for the last four years. They adjust each of those dollar amounts to account for medical inflation (compounded annually) and completion (meaning how much growth is still expected based on the benefit period of the policy).  Then they weigh each year appropriately to account for any changes that have taken place within your athletic department policies, injury prevention/procedures and sports census- the goal being to compute an average annual claims basis ($) for your institution as a predictor of where your upcoming year’s claims will finalize. From that dollar amount, the carrier then applies their target loss ratio (TLR). This is a percentage that varies by carrier and differs year to year depending on the carrier’s appetite for growth and how their book of business is running. Included in the target loss ratio is first and foremost, carrier profit. Yes, insurance companies need to profit in order to stay in business. A carrier may work in, as an example,  20% profit margin into their target loss ratio. The carrier also needs to include compensation to the third-party administrator for handling the day-to-day claims for the carrier as well as compensation to the broker for handling the sales and service part of the process. These items, combined, may total 40% of the premium which would put the carrier’s target loss ratio (amount of the premium they expect to go towards payment of claims), at 60%. The target loss ratio is then applied to the average annual claims total, explained above, resulting in the carrier’s proposed premium for the upcoming year.

                For example, if your institution’s average annual claims total is $100,000 and the carrier’s target loss ratio is 60%, their premium offer to you would be $166,666 ($100,000/.60). This example shows that they expect your claims for the year to be around $100,000 and the remaining $66,666 of your premium will go towards carrier profit, third-party administration and the broker.

Now that you understand HOW an insurance premium is calculated, you may begin to see how you could be paying a ‘premium’ to compensate your broker if incorporated as a percentage of the premium. The alternative is to pay your athletic insurance broker outside of the annual premium, directly, as a fee for service. This can be done by keeping your broker’s commission the same, but simply extracting it from the carrier’s premium. Here is a breakdown of what that would look like and the potential impact/savings that can be realized with this simple change.

Premium quote (including broker comp via the carrier): $166,666

                Broker compensation: $16,666

Premium quote (with 0% commission in the premium): $142,857

                Broker compensation by carrier: $0

                Broker compensation as a separate fee from the school: $16,666

                Total Annual cost to school: $159,523

                Savings to school: $7,143

As you can see, the broker is still compensated the same, but extracting their compensation from the premium allows you to bring down your total annual cost substantially. As you engage with your partner regarding your renewal this year, be sure to pose this philosophy and see what their response is 🙂

After years of working in the financial world and then in business-to-business sales, I embarked upon a career in athletic insurance. Over the years, I have met and spoken with thousands of great folks in the collegiate athletic world and have enjoyed every minute of it. Though my contacts at each school change frequently, the number one question that I get asked remains the same, “How can we keep our premiums from constantly increasing?”  The answer is more simple than you’d think-you pay less per injury. Well, duh, Chris, but how do I pay less?

One of the core traits of secondary athletic insurance is that it is considered excess or pays secondarily to other valid and collectable insurance plans. The more ‘other insurance’ your athletes have, the less your secondary insurance is responsible for. Further, if a claim does find its way to your secondary coverage, it is important to have established discount agreements with your local medical providers to reduce, and possibly eliminate, the balance owed. It is really that simple, yet athletic departments across the country struggle to understand (and implement) this strategy and are missing the surefire way to stabilize their athletic insurance premiums for years to come.

The default approach to annual athletic insurance renewals is to ask your broker to obtain competitive quotes from several insurance carriers in order to make sure that you are getting the ‘best’ premium. But, that is the reactive way of managing your program and may render only short-term gains. What if you challenge your broker to assist your department with implementing a strategy to increase the prevalence (and quality) of the primary insurance your athletes have? Or to be proactive in pursuing direct discount agreements with the financial decision makers at your top medical providers to pay a reduced rate for services rendered on your student athletes. These two actionable items may not immediately decrease your upcoming year’s premium, but they are sure to reduce your annual paid claims total. You will begin to see the savings/stabilization as soon as the following year. And that, my friends, is the key to a successful athletic insurance program.

Now, of course, there are additional factors that can impact the program on a year-to-year basis such as medical inflation and anomalies in injuries/claims (looking at you COVID-19) but, in general, working towards a more holistic approach to how you manage your athletic insurance program will help you improve your financial commitment for athletic insurance.

So go forth and ask these questions of your insurance partner next time you talk to them: What can you do to help our primary insurance utilization rate? What can we do? What can you do to help us work towards establishing (or improve) direct agreements with our local medical providers?