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Readers comment on insurance brokers, credit conditions, and other topics of current interest.
CFO Readers, CFO Magazine
April 1, 2010
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Broker selection is not generally understood, so it was good to see that "Is Your Broker Mediocre?" (March) hit the highlights of the important considerations. I would just like to throw out for consideration that, in my experience, some of the large regional brokers can do a great job at servicing very large accounts. Many of them have highly experienced and qualified people and have the same access to markets as the multinational brokers.
President and CEO
St. John's, Newfoundland, Canada
To me, the seven "best practices" for evaluating and managing a broker as described in your article are the ante at the poker table for any professional insurance brokerage firm. Every brokerage worth its salt should be delivering these services to all of its clients.
I'd like to further suggest that a brokerage firm executing flawlessly in all seven of these areas is still falling short of providing your company with any significant value. A company's risk-management program should be placed with a professional consulting firm and proactively managed by a team of expert consultants.
An insurance broker is doing his job when he accurately places your coverage and secures it for you at the best price.
A risk-management consultant is doing his job when he works proactively with your management team to identify potential risks and implements solutions to prevent those risks from becoming reality.
As a risk manager, I take a lot of time and effort to develop relationships with various individuals at various brokerage houses to ensure that I have a choice in insurance provider and, potentially, risk-management adviser. You can't just look through the phone book and have the receptionist at a company forward your call to the newest broker (and therefore the one most in need of new business) in the office.
If you manage a large or complex business, your insurance product design needs to be customized to your needs. Some insurance products look like they do the trick because they are so broad that they give the impression of providing adequate coverage.
You know your business — if it is complex, take the time and effort to hire the proper adviser. In many cases that means hiring an independent expert to review your business and come up with a plan of action. At that point, start looking for an insurance broker to sell you a policy that matches your predetermined design criteria. Some brokers may say that they are qualified to design your program, when in fact they know very little about your actual business but may know something about your industry. If your business is generic enough to fit into that design, it could be a good fit.
Your adviser can also help with the whole issue of broker compensation, often a sensitive topic because commission rates for insurance procurement are more attractive for the salesperson than fee accounts, which can be half of the commission amounts. I suggest that you do not use the same firm to provide expert advice and the insurance product, as that might present a conflict of interest.
Look for insurance-industry and risk-management education when picking an insurance or risk adviser. Key designations would be, among others, CIP, FCIP, CRM/ARM, and CCIB. And always ask, "What insurance/risk training/education do you have?"
Tonko Realty Advisors Ltd.
Calgary, Alberta, Canada
Are Board Members Too Accepting of the Numbers?
I am responding to your finding in "Relax, Your Board Loves You" (March) that board members rate the quality of business performance information as much higher than do finance executives, the people who provide such information. This is troubling news.
Finance executives are closest to the numbers and best able to assess their quality and limitations. Therefore, what the survey findings indicate to me is that board members are overconfident about the quality of information they receive from finance.
This overconfidence is a prescription for weak corporate governance. What the board members should be doing is challenging and probing in order to provide meaningful oversight and monitoring of the company, not saying, "Look at the great information we are getting from management!" Healthy skepticism is the key to effective governance.
Dana R. Hermanson
Dinos Eminent Scholar Chair
Director of Research, Corporate Governance Center
Kennesaw State University
Thank you for "The New Normal: A Spot Check" (Topline, January/February). Although one can appreciate signs of optimism during these challenging times, the percentage of worsened relationship among employees (40%) should not be understated.
Some decisions may have yielded a cost savings in the short term, but what will the implications be in the long term, as disengagement among employees continues to grow? Will the actual costs associated with lost performance potential and the flight of key talent once new opportunities become available, along with impending governmental changes, look different?
The Infusion Group LLC
Raleigh/Durham, North Carolina
While the optimism of the CEOs bodes well for future economic activity, it fails to take into account the hurdles of the current unprecedented legislative gridlock on major regulations that will affect the future of the nation's economy as well as the stalemate in lending by major banks. Unless these CEOs have alternative financing outlets, it seems doubtful that we will see a turnaround in the economy anytime this year.
No Help from Sarbox
The extent of the fraud given Koss Corp.'s size is simply astounding ("Fraud Case Casts Doubt over Sarbox Exemption," Topline, January/February). I question, though, how Sarbanes-Oxley could have prevented the fraud. Unless I am mistaken, internal controls are subject to management override.
Cincinnati Public Schools