how well do you know your broker
TRANSCRIPT
How well do you know your broker?Beverley Cosgrove RISK MANAGEMENT PROFESSIONAL
A mutually respectful working relationship with your
broker is a critical component to the success of your
organisation’s insurance program. In addition to the
usual background information about your business opera-
tions, the broker needs to gain an understanding of the
maturity of risk management within your organisation to
market the business effectively. The effort you put in
now could make a world of difference during a harden-
ing insurance market or the next time your organisation
suffers a significant loss.
The relationship with your insurance broker needs
nurturing, just like any other. Everyone is busy juggling
internal and external stakeholders, clients and deadlines,
and brokers are no exception. However, I would not
recommend leaving communication with your broker to
the front and back end of your insurance program, with
nothing in between. It is very easy to be complacent,
particularly when business is running smoothly and
claims are few, but your broker needs to be challenged to
keep your organisation front of mind, just as you need to
be challenged to be the best risk management profes-
sional you can be.
Lee Jones-Shehata, a risk management professional
with 36 years’ experience in local government says:
… the broker/client relationship is very important. In ourorganisation, the business relationship we have with ourinsurance broker is a critical component to business suc-cess. However, it extends beyond the client’s brief, wherebybuilding a good customer client rapport yields betterresults. This is because the broker understands not just thebusiness needs, but what we think, feel and value as anorganisation. That is, they know what matters.
So how do you go about creating or improving the
business relationship with your broker?
• Provide evidence of the strength and maturity
of yourorganisation’s risk management framework.
Providing evidence of the strength and maturity of
your organisation’s risk management framework
should be done at the beginning of your relation-
ship with your broker, and continually reviewed
throughout the life of their contract with your
organisation. The more they know about your
organisation, the more they can “sell” it to poten-
tial underwriters.
If the underwriters are comfortable with how your
organisation manages risk, they might be more
inclined to write your business, and hopefully, at
good terms.
Be prepared to be frank and transparent with the
information you provide to your broker. They have
an obligation to exercise reasonable care and skill1
in sourcing your insurance cover. And you have an
obligation to disclose every matter that you know,
or could reasonably be expected to know that may
affect the insurer’s decision to accept the risk. It is
an obligation under s 21 of the Insurance Con-
tracts Act 1984 (Cth).
Failure to declare information that you are aware
of may lead to a breach of your insurance contract
and result in the cancellation of your policy, or a
refusal to grant indemnity for a claim. Either of
which could have considerable financial ramifica-
tions for your organisation.
• Review your insurance broking services con-
tract every 3–5 years
Most organisations require their staff to undergo
an annual performance review and the same applies
to your insurance broking services. An annual
review is a way to open the lines of communica-
tion and discuss any issues that arose during the
year.
With respect to the period of the contract, I favour
a tender and selection process (at least) every three
to 5 years. It is a rigorous process if done properly,
so a year is probably not long enough to gauge
how well your broker is working for you. Whereas
3 years is long enough to form an opinion about
the service you receive and review the prevailing
conditions of the insurance market.
Jones-Shehata identified that a broker’s lack of
local government experience and service was a
trigger for the decision to move their tender to a
3-year term that includes a year-by-year renewal
option. “It (the 3-year term) keeps everyone focussed”,
she explains. “Skilled brokers have served our
business well and contributed to a relationship
based on respect, tolerance and understanding”.
The tender process creates a level playing field
among competing tenderers. Whether you adver-
tise or invite selected brokers to participate is a
matter for your organisation; however it is impor-
tant that any assessment process you choose is
able to withstand scrutiny. Being transparent and
accountable is simply good corporate governance
risk management today March 201620
no matter what industry space you work in.
If you know the insurance market well enough,
you will have an idea which firms have the
capacity to market your business. But like any
business relationship, it is necessary to do your
due diligence before making a decision about who
can best represent you: Do they have the skills and
resources to manage your account? Do they have
access to the right markets to source your insur-
ance? Are they approachable and available? Have
they included a service commitment in their con-
tract with you? Is there a complaints mechanism if
you are not happy with their level of service?
• Request quarterly claims reviews.
Claims reviews are an important insight into areas
of concern; and trends in types and locations of
incidents. If you can work out why some claims
are happening more than others, you have an
opportunity to mitigate or remove the risks. Even-
tually an improved claims history will be reflected
in your organisation’s insurance premiums, and
add positively to the bottom line.
Your claims history also has a bearing on the
broker’s ability to source affordable insurance
cover. If the claims history is particularly bad, it
might be difficult to source cover at all, especially
in a hardened market.
Discuss the best format for the review with your
broker. Because your claims are likely to come
under a number of different classes of insurance,
choose which classes have the most claims and
ask them to facilitate a review with the applicable
underwriter. A review also gives the underwriter
the opportunity to air any concerns or trends they
have identified and offer solutions.
For example, if you have a spike in motor vehicle
claims where drivers are hitting stationary objects,
perhaps the drivers would benefit from a defensive
driving course. There is nothing like the shock of
the driving instructor diving out of the way of your
braking vehicle to make you realise you need
more time to stop!
• Ask for a meeting with the underwriters of
your major classes of insurance.
Once upon a time you relied on the insurance
broker being the intermediary between you and
the underwriters. However, the insurance land-
scape is changing. And the business environment
is changing too. Organisations constantly seek
value for money in every facet of their business
operations, particularly those that do not bring in
an income, like insurance premiums.
My suggestion (if you have not done so already) is
to make a meeting with your major underwriters a
condition of your next insurance broker renewal,
and then seek feedback on your organisation’s
claims history through periodic reviews.
Do not feel that you are overstepping the bound-
aries by requesting a meeting with the underwrit-
ers. If they do not want to meet with you, ask why.
Surely, an underwriter has an interest in a client’s
attitude and aptitude to managing risk. You do not
need to have their number on speed dial, but it
helps to put a name to a face, particularly when
faced with a major loss.
• If your organisation’s risk management culture
is still developing, ask the broker for help.
Not every organisation, particularly smaller com-
panies in the private sector (for example) or small
local government authorities, have well-developed
risk management cultures.
The terms risk management and workplace health
and safety can (unfortunately) be viewed as a road
block to running the business, rather than a valu-
able tool to identify opportunities as well as
threats. Having worked for companies with that
attitude, I am keenly aware of the challenges
involved. My advice is to not give up. There is
help available.
Most broking houses have access to risk manage-
ment consultants as an added fee for service,
however there might even be a limited amount of
risk management advice included in your contract.
Some also have newsletters that you can subscribe
to for free. And of course, membership to a risk
management association gives you access to peer
support.
Whatever your situation, do not be afraid to stick
your head above the parapet and ask for help.
“A professional insurance broker who aligns to your
business goals, just as you would expect of any other
consulting professionals, eg, lawyers, engineers and so
on, is valuable”, says Jones-Shehata.
Keeping the broker informed supports obtaining the bestcover for the business. They offer choices. Good, consistentcommunication is the key to what business decision needsto be made, which in turn leads to positive outcomes.
At the end of the day, if your broker does not want to
work with you to achieve the best outcomes for your
organisation, or you constantly question their advice and
service levels, then perhaps your organisation needs to
consider whether that broker is the right fit for them.
risk management today March 2016 21
Beverley Cosgrove
Risk Management Professional
About the author
Beverley Cosgrove has extensive experience working as
a risk management professional in private enterprise
and local government. She holds post-graduate qualifi-
cations in risk management and was the first person to
be awarded RMIA’s Certified Risk Management Techni-
cian accreditation.
Footnotes1. L Parnell “Insurance Brokers: Obligations to Clients” Austra-
lian and New Zealand Institute of Insurance and Finance
(2011) 34(1) available at https://anziif.com.
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