by Dennis Mulligan

Many associations rely on offering member insurance programs as a way to recruit and retain members. The non-dues revenue these programs can generate through royalty payments is an additional benefit not to be overlooked. It is important for these associations to routinely evaluate their relationship with their endorsed broker /administrator, and underwriting carriers.

Association leadership needs to carefully review the agreements that govern these relationships. This is especially true if an association has been with a broker administrator or carrier for many years. These long-standing relationships may feel comfortable, but don’t always offer associations the same compensation and ownership rights and advantages that more recent arrangements provide.

11 Points to Consider as You Conduct Your Evaluation Process

1. Does your association own the insured records or is this the property of your broker/ administrator? It surprises me that there are still associations that don’t realize they don’t own their insurance program? This often surfaces when associations are looking to change broker/administrators.
2. Are you receiving full financial disclosure on your programs? This would include all commissions, fees, expense reimbursements, and any contingent, or profit sharing arrangements.
3. Do you have service-level guarantees built into your agreement? These service-level guarantees protect your members from shoddy service by assessing financial penalties to broker/administrators who fail to cure service problems.
4. Does your agreement provide a guaranteed marketing budget? Also, do you have a pre-approval clause on marketing material, and schedule?
5. Does your agreement restrict sales of any other product or service except those endorsed by your association?
6. Does your agreement provide adequate indemnification through a broad "hold-harmless"?  
7. Do you have a guaranteed minimum royalty?
8. Does your broker/administrator have to gain your permission to outsource any of their responsibilities to a domestic or non-domestic third-party provider? This is more important today as some broker/administrators are shipping call center, IT, billing, claims, accounting outside of the United States. This could increase the chances of identity theft of your members’ personal data.
9. Does your contract provide you with audit rights?
10. Does your agreement require that your broker/administrator get your approval before assigning your business to another organization due to a change in ownership?
11. Does your agreement restrict competition from your former broker/administrator for a period of two years after the termination of your relationship?

These are just a few considerations as you evaluate your current broker/administrator relationship. There are other points that you should consult with your attorney about, such as dispute resolution, limits of liability and venue.

Dennis Mulligan is Director of Business Development at USI Affinity