What should a business look for in an insurance brokerage firm?
There are major differences from one insurance brokerage firm to another. First and foremost, financial condition is important. An insurance firm that is thriving will continue to be able to invest in professionals and resources, which drive value to clients. Conversely, some large brokers have had extensive and ongoing restructuring and reductions in force, which has led to continual disruptions in client service.
You’ll want to ask about the brokers’ commitment to transparency and have them include a copy of their transparency policy. Also, does the brokerage firm have industry and product practice groups? Note, one or two individuals in a single office does not constitute an industry practice.
Also, find out about the firm’s international capabilities. Many middle-market companies have global operations or have established operations in China. An owned network of offices means the broker has made the commitment to serving the global needs of its clients. Be concerned if the insurance brokerage firm is working through an affiliated network, as it will not be able to control service guidelines and results.
It’s a good idea to get client references from similar-sized organizations. Ask for an overview of the value the insurance brokerage firm has driven into its organization. Also, what is the benchmarking capability of the insurance firm? Does it include cost issues, limits, retention levels, etc.? Is it internal to the firm, which is preferred?
Insurance market leverage is equally important. What is the premium volume the insurance firm brokers into the insurance market? A low relative volume will clearly impact the insurance firm’s ability to negotiate the best program and lowest cost.
Other questions you should ask are: Especially given the past year, what is the firm’s process for keeping you up to speed on insurer solvency? What has the firm’s experience been in reducing total cost of risk for its clients? What risk management information systems do they offer?
How can you build a strong relationship with your insurance broker?
Your insurance brokerage firm truly needs to have a partnership with you, similar to an insider relationship. Include your broker in meetings to help him or her to understand your short and long-term goals and corporate strategy. A great insurance program must not only be appropriate today, but also must have an eye on the future. Your broker should have some access to and a relationship with the senior most levels of your firm, perhaps via an annual stewardship report and meeting.
A positive relationship between a client and an insurance broker will always drive great value. Chemistry is important to communication. A mutually beneficial professional relationship between the client and the insurance brokerage firm will deliver great results, both today and in the future.
David Crooks is the chief operating officer of Aon Risk Services, Inc. Reach him at [email protected].