If you were the owner of a sports franchise and you were looking to hire a
coach, would you hire the first one that came along? Would you hire the one who
asked for the lowest salary? How about a
coach that didn’t have a playbook? An
owner who is looking to get the most out of
his franchise needs a coach who shares a
similar philosophy, has a game plan to put
in place, and a strategy to be competitive
and successful. The same is true for business owners looking to hire people for professional services.
Surprisingly, in the business world, these
obvious answers are often overlooked, particularly when it comes to insurance.
Business owners are bombarded by choices in brokers, yet many fail to ask some
fundamental questions in regards to experience, knowledge, planning and strategy,
says Josh Farrow, a commercial insurance
broker with Westland Insurance Brokers.
Smart Business spoke with Farrow
about the significance of asking the right
questions and how business owners
should evaluate the answers when hiring a
broker for their insurance needs.
Why is a broker’s experience overlooked by
business owners during the hiring process?
Normally, its price. The success of a business is ultimately judged by its bottom line
and cutting costs is the easiest way to
increase profit. Too often business owners
fall into the trap of thinking that insurance
is a commodity, when it is in fact a service.
They may select a broker and carrier that
are less expensive, but risk hiring someone
who is inferior to their other options. This
can lead to unforeseen problems having
the opposite effect of cutting costs.
Why is it crucial to hire a broker who has
knowledge in your business’s field?
A broker with knowledge in a particular
field will be able to handle his or her clients
with greater efficiency and superior service. The broker will be able to cooperate
with the business owner to help determine
which coverages are needed and which are
not, evaluate proper levels of coverage,
and answer questions in regards to legal
requirements that a business may have.
A broker with knowledge in a particular
industry will also be at the forefront of
industry changes and be able to pass that
knowledge on to clients.
What is the risk then of hiring a broker with
no knowledge of your business’s field?
Worst case, an owner who chooses a broker based on price over experience runs
the risk of being insured by a carrier that
ends up insolvent and unable to pay
claims. Many carriers today are new to
insurance and are not using sound underwriting principles to price their premiums.
This means they will eventually become
unprofitable and be forced out of business.
Worst-case scenario aside, there are still
other risks. Inexperience leads some brokers to represent carriers that do not have
the proper staff to service and manage
claims, which can affect a business
owner’s loss ratio and workers’ compensation experience modification. A broker
may also not know certain coverages are
or are not needed, potentially leaving a gap
in coverage or wasted money for the
client.
Should brokers have a strategy or risk management plan for the business before they
are hired?
Without a doubt, yes. A broker should
have a definitive risk management plan for
a prospective business, and be able to cite
examples of current work. An owner of a
sports franchise would not hire a coach
who did not have a playbook and strategy
already in place, so neither should the
owner of a business. A broker should be
able to communicate a potential plan for
the business and show how he or she will
be an asset to the company and team.
Are there certain qualifications or qualities a
broker should possess?
This may vary, but the broker and agency
that he or she represents should both be
licensed, and the agency should be large
enough to maintain appointments with a
comprehensive roster of insurance carriers.
This is a relationship business, and both
the broker and business owner need to
agree on what type of relationship they will
have, which will, in turn, reveal which qualities are important. A business owner
should look for a broker who has excellent
communication skills and who is honest,
punctual and accountable. This will ensure
a professional and effective relationship
between the broker and business owner. A
broker should strive to be a part of the
team.
How can a business owner check a broker’s
experience and knowledge in the business’s
field?
Ask for a resume, references and/or a list
of current clients that particular broker has
that are in a similar industry. A business
owner should also ask the broker about his
or her knowledge of that industry segment.
It should not be expected that the broker
would be as informed as the business
owner, but the broker should have a good
working knowledge of the industry in
which he or she is specializing.
JOSH FARROW is a commercial insurance broker with Westland Insurance Brokers. Reach him at [email protected] or
(619) 584-6400.
