Guide to RFPs: To bid or not to bid

The process of putting an insurance program out to bid e.g. a request for proposal (“RFP”) can be very time consuming. The decision to do so cannot be taken lightly. So why do firms put programs out to bid?

The tripartite that makes up risk management – risk managers, brokers and underwriters – is a partnership centered on trust, expertise and relationships. While everyone strives for long term relationships, periodically every relationship must be reassessed. Accordingly, risk managers will put programs out to bid in order to ensure they have best-in-class brokerage services and programs.

In some cases the procurement, internal audit or compliance department of a financial institution may require the corporation to bid their ‘vendors’ on a regular (e.g. 3-5 year) basis.

Ideally an RFP will enable the risk manager to discover:

  • New terms, conditions and pricing that may be available in the current market
  • Emerging risks for their sector and how to mitigate them
  • Current market trends
  • Tools and resources (e.g. analytics) available to help them identify, mitigate and transfer the risk
  • Claims trends

When to Issue an RFP

Once you decide to launch a bid, planning is critical. It is interesting to note that in Europe clients tend to allot a long time period to the process, while in the USA the allotted time is significantly shorter.

Whichever way you go, it is essential that you develop a timeline and completion date that is well in advance of your renewal to allow you ample time to choose a vendor and renew your program.

Typical Steps in the Process Include:

  • Issuance of the RFP to selected brokers
  • Allotment of a question and answers timeframe for participants
  • Receipt and review of the responses
  • Scoring the responses
  • Oral presentations
  • Additional scoring inclusive of the orals
  • The decision/appointment of the winner

If a new broker is selected, time must be allotted to:

  • Share information with the winner
  • Allow the winner to assimilate and absorb that information
  • Development of the placement strategy

Planning and Issuing Your RFP

Key considerations for your plan are:

  • Defining your objectives – are you simply testing the waters or are you truly seeking to select the optimal broker/program?
  • Do you need a consultant – do you have time to review responses, hold a Q&A, take questions from brokers, organize the orals, etc. If not, a consultant to project manage the RFP may be the answer. Note most consultants do just that, they project manage the RFP and condense/prepare the information to allow you to make a decision
  • Determining what’s most important to you and your firm: service, premium, fee, breadth of coverage, ease of claims payment
  • Decide what type of competition to hold – broker/market – broker is most typical
  • How do you select brokers to participate – do they have expertise in your sector
  • Identify the RFP goals from the different perspectives:
    • Risk Management
    • Senior Management
    • Participant
    • Develop and RFP Format
While everyone strives for long term relationships, periodically every relationship must be reassessed.

Determine what information to include in the RFP. Most typical RFPs include the following:

  • Purpose
  • Company background
  • Goals
  • Timeline
  • Procedure (e.g. will there be a written or in person Q&A? Will information be shared with all participants? Etc.)
  • Evaluation criteria
  • Organization and content of responses
  • Questions to be answered
  • Underwriting data
  • Page limitation
  • Compensation – what format?
  • Services included
  • References to be requested and their relevance to your organization

Once the brokers have submitted their response it is important that everyone who will be involved in the decision understands the process so they can make an educated evaluation. The risk manager should, as part of the review process:

  • Educate decision makers to allow them to properly evaluate the brokers
  • Explain the significance of criteria to be used – many of your decision makers may be unfamiliar with risk management/insurance
  • Recap responses for them, with commentary
  • Explain how to score participant responses
  • Provide commentary to explain qualitative information
  • Factor in the incumbent advantage

Score the Responses

Orals presentations are a key part of the process after all you need to feel comfortable working with the team you select. It is important to determine who will attend from your firm as well as from the brokers.

Additionally, educating participants prior to the presentations, making sure they are familiar with the responses (ideally all participants have read them) is important. Some risk managers like to establish a standard format for the presentation to make it easier to compare the participants. Others allow the broker to decide on their own format.

Making the Decision

  • Have you been objective and used your stated criteria?
  • Have you been impartial?
  • Did you check the references?
  • Gut check – can they do it?

Announcing the Winner

Traditionally losers are notified first so they don’t learn of your decision from the winner…this is a small industry! It is helpful to share selection criteria and provide helpful feedback to all participants.

The Transition

It is important to quickly meet with your new broker and share files, data, claims information, open items etc. so that nothing falls through the cracks. During this period your new broker needs to become experts on your risk so they can properly represent you in the market.

Challenges in the RFP Process

  • Decision makers outside of risk management -Do they understand brokerage and insurance enough to ask meaningful questions relevant to the sector versus using a relatively standard RFP process that doesn’t ask the right questions?
  • ARIBA and other similar tools -Are they asking for meaningful data? Some systems are so generic the questions asked are not relevant to brokerage.
  • Timing -The less time you give brokers, the less time those, other than the incumbent, have to develop a meaningful, tailored response.
  • Data sharing -Similar to timing, the less you provide, the less tailored your response.


This post was originally published on the Wire on January 11, 2016.

About Zakia Phillips

Zakia Phillips is Executive Vice President of Willis Towers Watson’s Financial Institutions Group and North Ameri…
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