In the third year of a long-term insurance deal, a broker for a client with 45 power plants asked to change the terms. The broker said the insurance market was softer (less expensive) now. They wanted a 10% cut in the price and a 5% increase in their own pay. If the insurance company agreed without making other changes, they would lose about 15% on the deal.
Three insurance companies shared this plan:
The main insurer covered 50%.
A second insurer covered 20%.
The team looking at the broker's request covered 30%. This team could take on 40% if the deal was good.
Time was short, and other insurance companies were willing to meet the new terms. The broker said they would find a new insurer if needed (called remarketing).
The answer was to offer a deal with rules. The insurer would take a bigger share of the plan if the broker agreed to clear terms, higher deductibles, and service rules. This way, the client would feel they won, and the insurer could still make money.
Role B — Broker
Goals
Break the long-term deal.
Get a 10% price cut and a 5% pay increase for the client.
Cause as little trouble to the insurance plan as possible.
Keep the main insurer at a 50% share if possible.
Keep options open with the other insurers.
Levers
Competitive Pressure: Use the fact that the insurance market is softer to get a better deal.
Time Pressure: Use the deadline to push for a quick decision.
Remarketing Threats: Say you will take the business to another insurer.
Portfolio Promise: Promise to bring more business later if the terms are good.
Potential Objections from the Underwriter
"Other companies have already offered a lower price."
"We need the full 5% pay increase."
"Our client does not want higher deductibles."
BATNA (Best Alternative to a Negotiated Agreement)
If you can't get the deal you want, you can keep the second insurer and find another company to replace the 30% share.
