A former BUCA executive describes how leadership manipulates actuarial rates through "marketing intervention," reducing rates for favored clients and shifting costs to others based on politics rather than actual risk. The practice systematically disadvantages smaller brokers while favoring large agencies.
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a little bit about the inner workings, particularly at renewal. If you're a BUCA broker, you probably know this. You may not know all of the inner workings, but most BUCA plans allow some level of executive leadership within their organization to actually impact rates by manipulating them. During my time, it was a common practice to allow someone outside of underwriting, an actuary, to have an impact on the rates that are different than what the risk actually calls for. That's a really fancy way of saying that a lot of times I reduced rates on certain groups and took that reduction and added it on to other groups. And that is a common practice that happens all the time.
Can you talk a little bit about why that happens?
Wow. Okay. The basic premise is it's called marketing intervention and it allows the executive who is, you know, face-to-face with the marketplace to be able to attract and retain business for reasons other than actual risk of the business. So it's a marketing ploy. But I'll also tell you that in my experience, the majority of that action was taken because of politics and favoritism to certain brokers. If you're, if you're listening to us today and you're not one of the big box brokers, I will tell you that in my experience, that it was commonplace to discriminate against you for their, for their benefit.
So, hey Rachel, how do you respond when that happens to you? Because I know it has.
I don't know, I have like a million things going on through my mind right now, Terry. You like opened up a black box that you may not be able to like stuff stuff back inside of that. Uh-huh. Um, I do find it funny in the sense that Um, I have definitely sold against brokers before, especially from larger national agencies who advocate that they can have a better renewal for their clients than I have. And I'm like, that's bullshit. Like, there's no way that's possible. Yeah. Well, I'll tell you that.
Yeah. I'll tell you that if I were in that position with you, I would absolutely deny that I played favoritisms with the big box brokers, and then I would not tell you the, the real truth is I did. So
