It appears the chief risk faced by those in charge of risk programs are sky high taxes.
According to a survey by the Risk and Insurance Management Society, which wrapped up a four-day conference in Los Angeles with an announcement on what chief risk officers are earning, the average base salary for CRO’s rose from $170,683 in 2008 to $183,572 in 2013, nearly a 7.5 percent increase over the five year period.
The survey is released every other year by RIMS and, this year’s survey comprised data from 2,246 completed surveys.
The annual RIMS conference in Los Angeles concluded with several sessions focused on risk management, including panels on enterprise risk management, supply chain risk, doing business in China, and selecting and working with brokers.
In a panel on selecting and working with a broker Michael McDonald, vice president of enterprise risk management for Quality Distribution Inc. a transportation company in Tampa, Fla., said risk managers like him may be out shopping for agents more as the insurance market continues to change.
“As you all know the insurance marketplace is rapidly hardening,” he added.
McDonald has a detailed process for which he measures whether his incumbent brokers are giving him the best value and products.
McDonald, who said he conducts a competition for his business about every three years, described the method he uses to choose competitors, and conduct a competition between brokers.
He uses referrals, industry associations, publications and ongoing working relationships to help choose a list of brokers to consider bringing in to evaluate.
Among the top reasons he goes out to bid with a request for proposals are broker service issues and assurance of competitive products and pricing, he said.
McDonald said he likes to dwindle down the competition to two brokers and then assign markets during the RFP process in which brokers get product pricing and information, a method he feels is a more competitive process that he believes will lead to the best prices and the best products for his company.
McDonald said he gives the broker competing for his business against the incumbent all necessary information, such as access to the policies and loss runs, except for premiums paid so as not to set a target and encourage the broker to go out and find him the best price, he said.
His selection criteria also includes: industry expertise, size and type of organization, technical competence, market access, financial condition, marketing philosophy and location. Other factors include knowledge, personality, philosophy and reputation.
Also on the panel was Todd Marumoto, director of risk management for toymaker Mattel Inc., and Tim Carlson, senior vice president of Willis Group North America.
Marumoto talked about the importance of ethics in the process of choosing a broker, emphasizing there needs to be a “code of mutual appropriate conduct.”
“I think full and total disclosure is absolutely necessary,” he said.
Marumoto also prefers to include in RFPs “exactly what is expected from the relationship with the broker,” he said.