# Case study: Nobody knew if the price was still good

Source: https://ollie.coach/case-studies/nobody-knew-if-the-price-was-still-good
Author: Oliver Fernandez, MBA
Published: 2026-08-21
Insurance brokerage · Canadian enterprise, CFO and Risk leadership (anonymized) · Full-program competitive review, 2025

A $985K broker relationship met the market for the first time in years — and the program was reset 51% lower.

## In short

An established insurance broker was paid roughly CAD $985K a year in fixed fee and capped commission. Service was not obviously failing, so the arrangement had never been tested. A full-program competition drew three credible challengers priced 33% to 54% below the incumbent. The company chose the strongest overall proposal rather than the cheapest, resetting three-year economics from $2.955M to $1.435M.

## Results

- Incumbent compensation: $985K (Annualized, fee plus capped commission)
- Awarded three-year TCO: $1.435M
- TCO improvement: $1.520M (Over three years)
- Improvement vs. baseline: 51.4%

## Nothing looked particularly wrong

For the company's Finance and Risk leaders, the insurance broker was not an obvious problem.

The incumbent understood the organization. It knew the insurance program, the renewal calendar, the claims history and the internal stakeholders. It supported a broad portfolio spanning property, casualty, professional liability, directors and officers coverage, cyber, crime, auto and other risk-management needs.

That institutional knowledge had value. And unlike a supplier missing service levels or causing operational disruption, there was no dramatic event forcing management to reconsider the relationship.

The problem was quieter.

> **THE UNCOMFORTABLE QUESTION**
>
> Nobody could say with confidence whether the company was still paying a competitive price.

## Familiarity can disguise commercial drift

Long-standing advisory relationships are particularly vulnerable to this problem. The supplier becomes familiar with the company. The company becomes familiar with the supplier. Annual renewals focus naturally on coverage, premiums, claims and risk — not on whether the broker's own compensation still reflects the market.

Over time, a commercial arrangement can become accepted simply because it is understood.

The incumbent agreement had an annualized compensation structure of approximately CAD $985,000, including a fixed fee and capped commission.

That number was real. What management did not know was whether it was still good.

## This wasn't the same as shopping for insurance

The distinction mattered. A large insurance program contains several different flows of money. Premiums go to insurers. Broker fees compensate the adviser. Commissions may offset fees. Other amounts may pass through the broker without representing broker economics at all.

If Finance simply looked at total payments associated with the program, it could easily compare the wrong things.

> **THE SCOPE**
>
> What does it cost us to obtain the brokerage and risk-management services we need — on a genuinely comparable basis?

## Then the market was asked

The company invited other brokers to price the program. This was not a theoretical benchmarking exercise. The alternatives were real firms prepared to compete for the business.

| Commercial position | Annualized compensation | Difference vs. incumbent |
| --- | --- | --- |
| Incumbent current agreement | $985,000 | — |
| Challenger A — full program | $659,600 | ~33% lower |
| Challenger B — full program | $500,000 | ~49% lower |
| Challenger C — full program | $450,000 | ~54% lower |

The market was not suggesting the incumbent was a few percentage points expensive.

> **THE DISCOVERY**
>
> A relationship can be performing well operationally and still be materially out of line commercially.

## But the lowest number wasn't automatically the answer

The lowest proposal came from Challenger C. If this were simply a price exercise, the decision might have ended there.

Choosing an insurance broker is not the same as buying a commodity. The adviser needs to understand a complex enterprise, represent it effectively with insurers, support claims and renewals, work with executives and risk teams, and manage a transition without disrupting critical coverage.

The company therefore had to distinguish two questions: who offered the lowest fee, and who offered the best overall program. Those questions did not necessarily have the same answer.

## What would you do?

Imagine you are the CFO. Your incumbent broker costs approximately $985,000 annually. The relationship is established and service is not obviously broken. Three credible competitors have now priced the program materially below the incumbent, with the lowest at roughly $450,000.

| Option | Choice |
| --- | --- |
| A | Stay with the incumbent. Institutional knowledge and transition risk justify the premium. |
| B | Give the incumbent the competitor pricing and ask it to match the market. |
| C | Choose the lowest bidder. A 54% difference is too large to ignore. |
| D | Treat the market test as evidence that the old baseline is stale, then choose the provider offering the best combination of economics, capability and transition confidence. |

How much should familiarity be worth — and how would you prove the answer?

## What happened

The company selected Challenger B for the full program under a three-year structure.

The decision did not simply follow the lowest annual quote. Instead, the company used the competitive process to reset its understanding of what the service should cost, then chose the provider it believed offered the strongest overall outcome.

| Three-year comparison | Approx. value |
| --- | --- |
| Incumbent baseline | $2.955M |
| Challenger B full-program award | $1.435M |
| TCO improvement | $1.520M |
| Improvement vs. baseline | 51.4% |

The outcome was substantial. But the more interesting fact was what had made it possible. Nothing dramatic had happened to the incumbent relationship. The company had simply refreshed its knowledge of the market.



## The market test changed the meaning of the incumbent price

Before the competition, $985,000 was the known price. After the competition, it was one market position among several.

That is a profound change in information. Management could now see that credible providers were willing to perform the work for dramatically different economics. It could also evaluate what additional capability, continuity or confidence justified paying more than the lowest proposal.

The decision was no longer anchored to history.

> **THE SHIFT**
>
> The company stopped asking whether the incumbent's price had increased reasonably and started asking whether the price was reasonable at all.

## The Parsimoney lesson

Commercial evidence has a shelf life.

A price negotiated three years ago may have been excellent three years ago. A supplier that won a competitive process may have fully deserved the business at the time. Neither fact proves that today's position is still aligned with the market.

That is the idea behind Market Freshness. The longer an important commercial position goes without credible testing, the less confidently management can say it understands the market.

> **MARKET FRESHNESS**
>
> A price does not remain competitive because it was once competitive. Commercial confidence decays when market evidence gets old.

## This doesn't mean rebidding everything every year

That would create its own cost and disruption. The point is not constant competition. The point is knowing when your evidence is no longer strong enough to support the decision.

Sometimes a benchmark or comparable transaction is enough to confirm that the current position remains sensible. Sometimes a direct conversation with the incumbent is enough. And sometimes — as in this case — the only responsible way to understand the market is to create a real competitive choice.

The intervention should match the uncertainty.

## Why this case matters

Many organizations without large procurement teams manage suppliers through relationships, budgets and annual renewals. That can work very well.

But it creates a particular risk with long-standing advisers, technology platforms and service providers: operational familiarity can gradually substitute for commercial evidence.

Nobody has to make a bad decision for the economics to drift. Sometimes all that has to happen is that nobody asks the market for a long time.

## Three questions to take back to your business

| # | Question |
| --- | --- |
| 1 | Which important supplier prices are you calling competitive without current market evidence? |
| 2 | When was the last time a credible alternative actually priced the work you buy today? |
| 3 | If your incumbent relationship is good, do you know what premium — if any — you are paying for that familiarity? |

> **IF YOU REMEMBER ONE THING**
>
> A good relationship can survive a market test. A stale price should not.

## Before and after

| Measure | Before | After |
| --- | --- | --- |
| Three-year cost | $2.955M | $1.435M |
| Basis for the price | History and familiarity | Four live market positions |
| Credible alternatives | None priced | Three full-program proposals |
| Decision driver | Nothing looked wrong | Economics, capability, transition confidence |

## Principles applied

- Principle 02: Competition Discovers the Market (https://ollie.coach/blog/competition-discovers-the-market) — Three real firms pricing the full program told management what the market would do — something no benchmark could have established.
- Principle 03: Stop Chasing the Lowest Price (https://ollie.coach/blog/stop-chasing-lowest-price-leap) — The lowest quote at $450K was not the answer; the award went to the proposal with the best combination of economics, capability and transition confidence.
- Principle 06: Comfort Is Expensive (https://ollie.coach/blog/comfort-is-expensive) — Nothing had gone wrong. That was precisely why the arrangement had never been tested.
- Principle 07: A Good Relationship Is Not a Performance Measure (https://ollie.coach/blog/good-relationship-is-not-performance) — The incumbent understood the business well and served it capably — neither fact proved the compensation was still competitive.

## FAQ

### Was the incumbent doing a bad job?

No. Service was not obviously broken and the institutional knowledge was genuinely valuable. That is what makes the case instructive — operational performance and commercial competitiveness are separate questions.

### Why not simply ask the incumbent to match the market?

That option was on the table. The company chose instead to treat the competition as evidence that its baseline was stale, then select the strongest overall program rather than reward the incumbent for a discount it only offered under pressure.

### Doesn't this mean rebidding everything every year?

No. The intervention should match the uncertainty. Sometimes a benchmark or a direct conversation is enough. Competition is the right tool when the evidence supporting an important position has gone stale.

A good relationship can survive a market test. A stale price should not.

Next step: take the Cost Resilience Health Check at https://ollie.coach/health-check
Vocabulary: https://ollie.coach/glossary