It may be a buyer's market, but choosing the best broker is far from easy.
David M. Katz, CFO Magazine
March 1, 2010
To me, the seven "best practices" for evaulating and managing a broker as described in this article are the ante to the poker table for any professional insurance brokerage firm. Every brokerage firm worth its weight in salt should be delivering these services to all their 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 coverages and secures for you, 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 turning into reality.
Posted by Mike Gau | March 18, 2010 10:31 am
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 advisor. You can't look through the phone book and have the reception forward your call to the newest (and most in need of the new business) broker 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 (many sublimits for coverage you have little need for) that it gives the impression of adequate coverage. You know your business, if it is complex, take the time and effort to hire the proper advisor - in many cases this means hiring an independant 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 insurance brokers may say that they are qualified to design your progam, how many hours do they take learning your business, when in fact they know very little about your actual business but they may know something about your industry. If your business is generic enough to fit into that design then it could be a good fit. If not, take the time to hire an expert and then hire the insurance broker. The expert will also help with the whole issue of broker compensation which is always often a sensitive topic since commission rates for insurance procurment are more attractive for the saleman 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 provide the insurance product since there may be a conflict of interest in the advice since you are paying the left hand for advice and the right hand for the product. Look for insurance industry education and risk management education when picking an insurance or risk advisor. Key designations, in my mind, would be CIP, FCIP, CRM/ARM, CCIB and others. Ask the question, what insurance/risk training/education do you have? My two cents.
Posted by Darius Delon | March 12, 2010 11:25 am
Great article! Broker selection is not generally understood, this article hits the highlights of the important considerations. I would like to throw out for consideration that some of the large regional brokers can do a great job at servicing the very large accounts in my experience. Many have very highly experienced and qualified people and have the same access to markets as the multinational brokers.
Posted by Craig Rowe | March 02, 2010 09:28 am© CFO Publishing Corporation 2009. All rights reserved.