Like water under the bridge, lingering suspicions between insurance buyers and their brokers following the contingency fee and bid-rigging scandals that tarnished the reputations of some of the industry’s biggest players seem to have dissipated, with risk managers taking advantage of the new transparency in vendor compensation to reassess their brokerage relationships and put together new, individually tailored service packages.
Carolyn Snow, director of insurance risk management with Humana Inc., in Louisville, Ky., and a Risk and Insurance Management Society board member, said her firm does business with one of the large brokerages on a fee basis, which has worked out well.
For example, her broker offers a best practices program that measures service quality of carriers, including underwriting, policy administration, claims performance and overall service.
“If we were looking to change carriers in a particular line, then we could get a quality report on the companies we were considering,” Ms. Snow said. “It would give an indication of the overall type of service that a particular carrier is providing.”
Her broker’s assessment program may be necessary, as her company could be looking for a new provider in one line of business for Jan. 1 renewals. In fact, Ms. Snow noted, most of Humana’s renewals come up on Jan. 1—including property, casualty, workers’ compensation and commercial auto—but she does not rely solely on the broker for support.
“We do a lot of our services internally,” she said. “We do all the renewal applications, gather all the information, and then discuss it with the broker and find out if more information is needed, what is happening in the market, and if the markets are looking for new information or different kinds of information.”
Her advice to risk managers in working with their broker is to know their organization, their industry and how their company is unique within that sector.
“They also need to take ownership for the information that is put together for presentation to the markets and participate with their broker in the presentation,” she added.
Ms. Snow recommended that risk managers be present during talks with underwriters, “in a face-to-face meeting or with conference calls, but don’t just let your application be submitted to the underwriters without your involvement. It makes a world of difference.”
Risk managers also need to be visible within their own companies, “so people will pick up the phone when something happens,” she added.