Many facets of an insurance broker’s responsibility may not be visible to the client. From a client’s perspective, nothing outweighs the importance of getting the best coverage at the best price. However, getting from A to Z involves many important steps that are often bypassed in the quest to get the quote.
“It is the broker’s responsibility to assess the risk, determine the exposures the client faces and develop strategies to address them,” says Steven Janoff, who handles business development for Royal Marine Insurance Group (RMIG).
Smart Business spoke with Janoff about how to maximize your relationship with your broker.
What should you expect from your broker?
At the initial client meeting, an exchange of ideas should take place. What has occurred in the past to bring the client to this point? The importance of a proper assessment of the client, not the risk, regarding expectations should be stressed. Most underwriters are working to insure the client, the operation and the business and not just the ‘physical property’ of the business.
This is a good time to discuss problems involving the use of multiple brokers. It is important to realize that people don’t want insurance; they want ‘protection from risk.’ If a person goes to the store to get a drill bit, we know in reality he doesn’t want a drill bit, he wants a ‘hole.’ A good broker understands this and does not attempt to offer a solution (insurance) until it is determined what problems exist and how the client might like to address them. Assuming both parties feel that the relationship would be a good fit, then the next step would be risk analysis.
What exactly is risk analysis?
Risk analysis is the process of examining all aspects of the client’s operation to determine exposures to ‘risk’ that could negatively impact the client, financially or otherwise. It is important to note that the client should be looking to ‘manage’ these risks. The broker must be knowledgeable about the client’s risks and be able to offer solutions to address them, which may include risk transference (insurance), risk retention (deductibles or other methods of self insurance) and risk mitigation steps designed to limit exposures. Unfortunately, it is usually impossible to predict or eliminate all risk.
Proper examination of the risk is critical current, complete information must be obtained. Do not rely on the in-force policy, if this is not a new risk. Again, ‘fact finding’ is essential. Proper documentation is necessary at this stage (application process). If it is determined that transferring the risk to an insurance company is a key ingredient in protecting the client, then marketing of the risk by the broker is the next key step.
How can using multiple brokers be detrimental to the client when marketing the risk?
Underwriters look at the brokers’ loss ratios with the company, the length of appointment, quality of communications, reputation in the industry for the line of business they represent, etc. Use of multiple brokers can be detrimental because there are a limited number of insurers available to underwrite a particular risk. Underwriters review a submission on a first-come basis. So if the less experienced broker approaches the best market first, the better broker is left with alternative markets. In this situation, if the best broker wins the account, the best market loses and vice-versa, or the broker is ‘blocked,’ altogether from obtaining terms.
In marketing the risk, it is important for the broker to know market availability, market appetite, underwriting rules and guidelines. This is where the client benefits from employing the right broker, because many times the relationship the broker has with his or her underwriter will be the difference between receiving favorable terms versus a declination. If the underwriter’s experience with this broker is good, it is likely that the best terms will be made available for the client. Merely knowing where to send an application to obtain a quote does not necessarily result in receiving the most favorable terms.
Once the quote or quotes are received, the broker should present all of them to the client and address any and all benefits, concerns and limitations that exist, so that the client can make an informed decision.
What should the client expect of the broker after the policy is put in place?
There is an expectation of bilateral communication between the client and the broker to address changes that may have occurred that would affect the nature of the risk. Because insurance is generally not the client’s forte, they may not realize the importance of a change or an event. Therefore, a good broker will check-in with the client throughout the policy period.
Also, an broker should be an excellent facilitator in presenting a claim to the insurer’s claims department on behalf of the client. Most companies handle claims from then on directly with the insured. However, the value of the right broker is demonstrated by his or her expertise as a liaison for the insured dealing with adjusters, claims representatives and attorneys.
Prior to renewal, the broker should once again begin the fact finding process, analyzing the client’s current situation to address any changes. This is also the perfect time to review the ‘relationship’ and address any concerns. An broker’s goal should be to continue to earn the client’s business year after year. A good question for a broker to ask a client is: ‘On a scale of one to 10, 10 being perfect, where would you rate me?’ If the client does not answer 10, the next question from the broker should be: ‘What can we do to score a 10?’
Steven Janoff handles business development for Royal Marine Insurance Group. Reach him at firstname.lastname@example.org or (305) 477-3755 x223.