HNI Sees 'Risk Clarity' As An Opportunity

In this hard market, independent agents must view the risk appetite of some insurance carriers as a paradox. Risks that were embraced for years by a carrier at reasonable rates and terms, with few questions asked, are now being abandoned regardless of whether the client has had any significant losses.

Despite such difficulties, at one agency in New Berlin, Wis., the concept of risk is viewed as a challenge to be managed, not shied away from, with insurance being only one component to consider. With its trademarked “Risk Clarity Formula,” Mike Natalizio, president of HNI Risk Services Inc., says his agency “embraces risk” and sees great possibilities in loss control.

“Too often in this industry, we discourage our clients from taking any risk,” observed Mr. Natalizio. “If an account has any size or stature, as it takes on more business, its risks get larger and the trend is to become more conservative in its insurance approach, which is fine. But we want to embrace risk and talk about problems in the company. We want to look at it and to turn risk into opportunity.”

This philosophy has spawned some unique approaches to how the agency delivers its services, from developing its “Risk Clarity Formula,” to building an educational facility for clients to meet and network within HNIs headquarters. Indeed, its commitment to anticipating and stopping losses before they happen prompted the agency earlier this month to change its name from HNI Company to HNI Risk Services.

The agencys commitment to risk management and systematic approach in tackling exposures is a large part of the reason that HNI was awarded an “Honorable Mention” this year in National Underwriter's first “Commercial Insurance Agency of the Year” program.

The foundation of HNIs approach, explains Mr. Natalizio, is a seven-stage program under the trademarked name, “Risk Clarity Formula.” The process is a step-by-step examination and realization of the causes of claims, leading to decisions on what to do to check the rising cost of risk with loss control initiatives, which ultimately lead to reductions in insurance premiums. It is a process that he admits the agency got away from during the long and deep soft market, but on which HNI has refocused with a single-minded commitment.

“We were a victim of not taking ownership in risk,” Mr. Natalizio pointed out. “What happened was a lot of the commitment in safety and loss programs was lost. Losses went up because they had become backburner issues. Today, sound risk management needs to be in place regardless of [the price of insurance].”

“Insurance is only one piece of the puzzle,” Mr. Natalizio went on. “A client can retain a certain level of risk, but the value-added services [such as safety and loss-reduction incentive programs] reduce their long-term cost of risk.”

“The new paradigm is to look at the cost of risk as opposed to just looking at insurance costs,” he explained. “If losses continue to happen, and a client does not control them, then insurers charge more for coverage. It gets to a point where it cannot continue.”

HNIs approach is to look at the total cost of risk, not just the price of insurance, and work with clients to “drive down” such expenses overall. However, it is an idea that only works when there is a shared commitment by both HNI and the client, Mr. Natalizio emphasized.

“If the client is just looking for the lowest [premium] and is not encompassing our risk management philosophy, then we are not their broker,” Mr. Natalizio observed. “What we are looking for is a shared level of commitment.”

The HNI approach is to develop a “road map” of what the client needs to do to identify, limit and manage their exposures–a process that, according to Mr. Natalizio, clearly lays out a loss control process over the long term.

“[The client] gets a better understanding of where they are going, and they know what the next step is, but they also know what is available on that road to help them,” he explained.

One valuable component of that system, which also underscores the agencys commitment to risk services, is the HNI FOCUS Center, as in “For Our Customers Ultimate Success.”

The center is a state-of-the-art training auditorium for up to 30 people. The multimedia center is used to bring clients and agency personnel in for training sessions on risk management issues. The facility also has Internet conferencing capability so that training can be conducted for a larger and geographically broader audience.

Because of this intense focus on risk management, HNI is in a position to “place business with the best carrier at the best price, but not always the lowest price,” Mr. Natalizio said.

“We dont take a shotgun approach to the marketplace,” he noted. “We identify what makes this risk better than the others, and why that underwriter should give it their best effort.”

Underwriters are drawn to the agencys idea that risk management is a shared commitment between HNI and its clients, and that gives HNI's accounts an edge in getting business written by the selected underwriter, he added.

The agency sticks primarily with standard market carriers for about 80 percent of its commercial business. The remainder goes to the excess and surplus market, with very few clients having to resort to captives for self-insurance.

Despite the hard market, Mr. Natalizio said his agency has been able to keep the percentage of business between standard and E&S markets relatively constant, although he admits to a slight increase in E&S placement. He attributed this to the fact that the agency begins working on the renewal process as early as seven months before expiration.

One important selling point for HNIs services is that as its customers grew over the agencys 39-year history, clients realized that they did not have the expertise in-house to coordinate their risk management needs. Thus, clients became increasingly dependent upon HNI for such services.

In response, the agency grew its risk management services department, hiring safety managers and support staff to assist clients in these areas. This boosts the client's bottom line, because they do not need to hire additional personnel themselves to take on such specialized tasks.

The agency also capitalized on the power of the Web by making services available online, such as safety and loss control information, federal compliance material, and certificates of insurance.

“We work hard on our business, not just in it,” observed Mr. Natalizio. “We are not just looking to help our clients today, but in the long term.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, September 23, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

Special Reports /

HNI Sees 'Risk Clarity' As An Opportunity

Related Stories

Recommended For You