Why Most Policy Reviews Are Theater

Here's an uncomfortable truth about the insurance industry: the policy review you receive from your broker is, in most cases, marketing material dressed up as analysis.

I don't say this to condemn brokers. The structural incentives of the insurance brokerage model make genuine policy review economically irrational. Understanding those incentives helps explain why the review you receive might not serve your interests.

The Economics of Brokerage

Brokers earn commission on policies sold. That commission is a percentage of your premium—typically 10-15% for commercial lines.

Let's do the math. A small business with a $15,000 annual insurance spend generates roughly $2,000 in annual commission for their broker. At a blended billing rate of $200/hour, that's 10 hours of work before the broker loses money on the relationship.

What fits into 10 hours? Marketing. Quoting. Application processing. Renewal coordination. Certificate issuance. Claims assistance when needed.

What doesn't fit? A comprehensive review of every policy form, endorsement, and exclusion. That takes 15-25 hours for a typical small business insurance portfolio.

Brokers who provide thorough policy reviews to small accounts are doing charity work. The economics don't support it.

What Passes for Review

Instead of comprehensive analysis, most small businesses receive what I call "declaration page review."

The broker confirms your coverage types (GL, property, auto, workers' comp). They verify your limits match your requirements. They check that named insureds are correct. They ensure certificates can be issued.

This takes about an hour. It's not nothing. But it doesn't touch the substance of your coverage—the policy language that determines whether claims get paid.

A business owner who receives this review and believes they've had their coverage "analyzed" is mistaken. They've had their purchase order confirmed. Very different things.

The Knowledge Gap

Here's the part nobody wants to say out loud: many brokers couldn't provide substantive policy review even if the economics supported it.

Insurance brokerage is a sales profession. Success correlates with relationship skills, market knowledge, and the ability to close. It doesn't necessarily correlate with deep technical expertise in coverage analysis.

A broker with 15 years of experience might have excellent instincts about what coverage a business needs. That same broker might not be able to explain the difference between ISO form CG 20 10 and CG 20 37—a distinction that determines whether your additional insured coverage actually provides the protection your contracts require.

This isn't a criticism. It's a description of specialization. Brokers specialize in client relationships and market placement. Coverage analysis is a different specialty, one that most brokerage models don't support.

The Conflict of Interest

Even when brokers have the expertise and time for substantive review, they face an uncomfortable conflict.

Imagine a broker discovers that their client's policy has a significant gap—coverage that should be there but isn't. The honest move is to tell the client, help them add coverage, and process the resulting premium increase.

But that conversation risks making the broker look bad. Why didn't they catch this when the policy was placed? Why has the client been paying for inadequate coverage? Does this broker actually know what they're doing?

Some brokers handle this well, treating gaps as opportunities to add value. Others avoid the conversation entirely, hoping the gap never becomes a claim. The incentive structure makes avoidance rational even though it's wrong.

What Actually Works

If broker review has structural limitations, what alternatives exist?

Independent consultants offer policy review as a service, typically charging flat fees rather than commissions. Their incentive is to find issues—that's what you're paying them for. The downside is cost: $150-400 per hour for qualified expertise, and a full portfolio review takes many hours.

Risk management firms provide this service for larger accounts, often bundled with loss control and claims advocacy. If your premium spend is above $50,000 annually, this might be accessible. Below that threshold, you're probably not a target client.

Technology tools are emerging that automate portions of policy review. The quality varies dramatically, but the best tools can identify coverage gaps, extract key terms, and flag issues for human review at a fraction of the cost of traditional consulting.

The Realistic Expectation

I'm not suggesting you fire your broker and handle insurance independently. Brokers provide genuine value: market access, placement expertise, administrative support, advocacy when things go wrong.

What I am suggesting is that you calibrate your expectations. The "policy review" your broker provides is probably not the comprehensive analysis you imagine. It's more likely a confirmation that your coverage exists, not that it works.

If you want to know whether your insurance will actually protect you when something goes wrong, someone needs to read the policies—really read them, all the forms and endorsements and exclusions. Your broker probably won't do that for free. You can do it yourself (tedious but possible). Or you can pay someone whose job is to find problems.

The worst option is assuming review has happened when it hasn't. That's how businesses end up with policies that look fine on the declaration page and fail completely in practice.