4 things risk managers are looking for from their broker

A full accounting of service and timely response are among chief concerns

Todd Marumoto, director at Mattel Inc., speaking at a session on Selecting and Working With a Broker at the RIMS Conference in Vancouver, BC.

Can you account for the number of hours you spend servicing each of your commercial accounts? Do you know what hourly rate you would charge for different staff members at your firm? The ability to answer these questions are among the foremost concerns of risk managers, according to panelists leading a session on “Selecting and Working With a Broker” at the recent RIMS Conference in Vancouver, BC.

The session was an adaptation of the RIMS publication of the same name (available at www.RIMS.org/RIMStore) and was presented by three of the risk managers who recently updated the guide: Gordon Adams, senior vice president and director of risk management and human resources at Tri-Marine International, Inc.; Todd Marumoto, director at Mattel, Inc.; and Hal Larson, vice president and risk manager at Muscatine Foods Corp. The session covered a wide range of criteria that risk managers should use when reviewing their relationship with their existing broker and conducting an RFP for a new one. For brokers who weren’t in attendance (and there were only two in the room), here are a few of the key things risk managers are looking for in their broker relationship.

1) Detailed Service Agreement: “The broker makes his income on commission,” said Gordon Adams to the audience of risk managers. “In good times, it goes down; in bad times, it goes up. But the work stays pretty much the same.”

Adams recommended negotiating a fee agreement and being very specific about what the fee covers, such as quarterly reviews, claims reviews and meeting with senior management of the brokerage on a semi-annual basis to discuss the relationship.

All three panelists also recommended that the service agreement should have clear expectations around the number of hours required to service the account, an issue that clearly animated some risk managers in the room. Todd Marumoto recommended setting up regular performance review meetings to determine if those expectations are being met. “All of us deserve to know that,” he said.

2) Innovative Thinking: Adams also recommended asking brokers to bid based on general information about the organization, without reference to existing insurance programs.

“You open the door to make them think about your business and bring anything to the table that they think makes sense. You’re encouraging innovation through that process,” said Adams.

Adams acknowledged that for brokers to complete the bid process, risk managers should provide them with as much information as possible about the organization and its program, including: insurers, policy limits, retentions, letter of credit requirements (and how they draw down on the company’s financial ability), engineering reports about the exposures, and loss runs (including information on claims frequency, high value limits and how quickly claims are settled).

3) Transparency: Risk managers want to know how brokers will be conducting business on their behalf, how they’re being compensated and should get statements of these details in writing, said Marumoto.

“You want to have a really fine sense of how they’re representing you. Because in the end, whoever you choose is really an extension of your company.”

4) Honest and Timely Communication: Nothing is more frustrating than an unreturned phone call or email, noted Marumoto.

“Whether somebody has an answer or not, I’d much rather know that you’ve received it and that you’re working on it rather than you have an answer immediately.”

Hal Larson underlined the importance of meeting the people who are actually going to be working on the account during the bid process.

“One thing I do not respect is a broker that comes in with a proposal and brings me all of their top notch people and I know that’s the last time I will ever speak to them,” he said. “If they want to bring Mr. Big Dog in, that’s fine. But if there’s five people on the team, they better be in that room and they better be talking to me.”

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