The search for a quality insurance broker should be conducted with great diligence. Policies can be complex and the failure to have the proper coverage in place can have devastating results.
Every company is unique, so insurance needs can vary significantly from business to business. The ideal broker should take the time to analyze your operations and then coordinate the appropriate coverage. Most importantly, he or she should be someone with whom you will be comfortable establishing a long-term relationship.
“Your insurance broker should be a trusted adviser, much like your CPA or attorney,” points out Scott Firestone, area president of Arthur J. Gallagher & Co.
Smart Business spoke with Firestone about how to go about finding a good insurance broker, the importance of forging a relationship with your broker and why a company’s size should not factor into the level of service that is provided.
What types of services does a quality insurance broker bring to the table?
A company should look to its insurance broker to provide all its risk management needs. This includes coverage placement; however, it also includes advice on how to mitigate costs through risk management and nontraditional risk transfer techniques.
Your insurance broker should have a wealth of in-house services and experts available to all clients. Loss control, claims, actuarial and manageable workloads for account managers are key services. Many brokers rely on insurance companies to provide some of these basic services. In most cases, your broker or agent is paid through commission via the insurance companies. The client pays the same amount regardless of the sophistication or bench strength of the broker. Why would a business not choose the broker with the appropriate services to manage risk and properly service the account? Especially when there is no additional cost to the client.
How should a business go about finding a good broker?
The most effective way to find a good broker is to ask for a referral through a trade organization or competitor. There are many, many insurance agents and brokers; however, you want to do business with a firm that knows a lot about what you do for a living and the risk exposures you face. It is also necessary to ask a broker for references to make sure that promises have been kept and that his or her clients have had a good experience with the firm.
Why is it important for a company to forge a relationship with its broker?
Insurance policies are complicated and you need to do business with someone who can ask the right questions and access the proper coverage. Improper insurance coverage can put you out of business in the event of a loss. A business needs a broker who has the ability to place coverage that will cover the assets and liabilities for the business, contractual obligations, business planning and personal protection. Only a sophisticated broker with knowledge of your business can make sure you are properly protected.
Does a company’s size factor into the level of service that is provided?
The size of a company should not make a difference in the level of service provided. A ‘small’ company has the ability to have a loss as large as any Fortune 500 firm. The key is to work with a broker who has the intellectual capital to know what the firm needs, who has access to the markets and who has the in-house resources to provide the safety and loss-control necessary. Size is relative to premium only. Every risk has the ability and probability to have a claim. A good insurance broker will ensure that the proper coverage is in place when that claim occurs.
What steps can a business take to minimize risks and, in turn, qualify for lower premiums?
This is a tough question to answer without knowing the company’s specific risk management needs. The fact is that every company is different, and the premium isn't the only cost involved in a quality insurance program. Every company can manage its risk in different ways to lower its overall cost of risk. It takes a quality insurance broker to review all of your options with you so that your insurance budget goes as far as it can to protect your company.
SCOTT FIRESTONE is area president of Arthur J. Gallagher & Co. Reach him at (818) 539-2300 or firstname.lastname@example.org.