A broker who does not fully understand a client’s business or lacks direct links with insurers may not only fall short in advising on coverage but can cause headaches on all sides of the insurance relationship, a policyholder attorney with an international law firm said on Monday.
Selena Linde, a partner with the Seattle law firm of Perkins Coie LLP, told about 60 attendees at an afternoon session of the Risk Insurance Management Society 2015 conference that choosing an insurance broker carefully can be crucial to effectively managing risk in nearly any company.
“Talk to your broker and see what services they can offer you,” she told an audience comprised almost entirely of risk managers.
“Brokers have a lot of tools in their arsenal that are really quite helpful, but if your relationship has gone stale they may not be giving you that information,” she said. “You have to ask the questions.”
Joining Linde in the session entitled “What has your broker done for you lately?” was Craig Hoffman, risk manager for Wakefearn Food Corp., a Keasby, N.J. company that is the largest retailer-owned cooperative in the United States.
Relationships Are Key
Hoffman, who in recent years has overhauled his company’s risk management program, said a key to effectively managing the wide-ranging risks employers of all sizes routinely face is making sure the right people are on hand to guide the company through policy decisions, claims filing and every other insurance-related function.
“We do things the old-fashioned way,” he said of his company’s approach to designing its insurance coverage. “It’s all about relationships, with brokers and underwriters.”
The insurance professionals “are an extension” of the risk management department, he said. “You have to make sure you have the team that can understand your business and your needs as a company.”
Both panelists noted that risk managers today are on the lookout for ways to customize their insurance coverage. That has led many businesses that previously relied on a single insurance broker to scout instead for multiple brokers.
Wakefearn Food Corp., for instance, now uses separate brokers for its property, casualty and executive lines, Hoffman said.
The panelists urged risk managers to consider issuing a request for proposals to identify well-qualified brokers. The benefits of requesting proposals go beyond simply selecting the best insurance professional, they said.
“You’ll actually learn a lot about what’s going on in the industry through the RFP process,” Linde said.
Offering samples of generic RFP documents, the panelists explained that risk managers should carefully customize the RFP to a business and allow ample time for brokers to respond with a well-considered proposal.
A business should provide the brokers with as much useful information as possible – including key financial data and past claims information – to give them an opportunity to thoroughly evaluate the company’s needs and provide a meaningful response.
But in providing information to a broker, Linde emphasized, a company should be aware that the relationship is not privileged.
“You do have to be careful in discussing (sensitive) information with your brokers,” she said, reminding the audience that brokers also work closely with insurance companies and could share information that might adversely affect the client in the event of a coverage dispute.
She said any broker who is provided with potentially sensitive company information should be required to sign a confidentiality or non-disclosure agreement first.
The panelists offered tips that could help a risk manager identify problems in a current broker relationship and aid in choosing a broker from those who are making a bid for new business.
One critical clue that an existing relationship is not working is if the broker recommends standard or “pre-packaged” insurance policies when a client would be better served by coverage specifically designed around the business’s needs, Linde said.
“Brokers who are buying off-the-shelf policies are probably not doing their job,” she said.
She urged that any company that requests new proposals from brokers should include its existing broker in the process. “That existing relationship may not be broken, but it may need to be refreshed, and you can jumpstart that through the RFP,” she said.
An RFP process should include both written and oral presentation components, she added, because written proposals often contain useful information that can benefit the client no matter which broker is selected.
Linde offered several other tips that can help distinguish a good broker from a so-so-one.
Brokers who want to be truly responsive to a client’s insurance needs will go the distance to show their interest and learn the client’s industry, she said. Typically, they will make multiple visits to the office or work site throughout the year and will work closely with insurers to shape appropriate coverage.
A good broker should help to educate the company on available insurance products, propose ways to minimize risk and stay abreast of changes in the client’s industry, Linde said.
Hoffman added that the broker can be an invaluable team member when it comes to getting claims paid.
Noting that members of in-house risk management teams often oversee claims filing and payment, Hoffman said he likes to tap the broker for help in this area.
“Our broker has to be a partner in the claims process,” he said. “The broker has the relationships with the insurers, and that’s critical – it definitely gets a lot of claims paid for us throughout the year.”
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