In the realm of relationships, the bond between risk managersand their insurance brokers is right up there with that ofpatient/doctor or lawyer/client. Many of these relationships lastas long—or longer—than the average marriage, and the good ones arebuilt on many of the same elements: trust, growth, reciprocity andgood communication.

But unlike a personal relationship, the risk manager/broker bondleaves no room for error. A communication misstep on the part ofeither party could result in a coverage gap that could provefinancially devastating for the client, and in turn get the brokertossed out the door. And in today's hyper-competitive insurancemarketplace, it's a relationship that gets re-evaluatedregularly.

“We keep testing the relationship to see ifthey can go the extra mile,” says Michael Liebowitz, seniordirector of insurance and enterprise risk management for New YorkUniversity. “They have to keep showing what the results are basedon the difficult questions that are asked. This gives you an ideaof how professional, how deep they are in terms of providingservice to the customer. They're only as good as their lastconversation with me.”

What clients look for

When it comes to the basics of what they look for in a broker,risk managers agree on the essentials. Among the bottom-lineattributes they expect are:

• Transparency

• Responsiveness

• Depth of service

• Expertise

• Specialization

• Reputation

• Carrier connections

• Flexibility

• Knowledge sharing

• Policy terms and conditions

• Competitive pricing

“We seek technical knowledge, professionalism, relationshipswith key parties in the insurance marketplace, administrative capability (weissue thousands of insurance certificates and have admittedpolicies in 25 to 30 countries), and knowledge of us and ourindustry,” says Gary Pearce, vice president of risk management forworkforce-solutions firm Kelly Services Inc. “Setting aside thethings we should be able to take for granted, the core attribute weseek is to develop a trusted business partner relationship wherethe broker's external expertise acts as an extension of ourin-house resources. We want the broker to collaborate with usin designing and executing creative solutions.”

Today's risk managers are more sophisticated and demanding,which raises the bar for broker professionalism, says Jeff Colburn,managing director of Marsh Risk Consulting. After the basics aremet, however, there are a lot of variables in what individual riskmanagers look for in a broker—from the “day-to-day blocking andtackling” of issuing policies and insurance cards, to providinghigh-level expertise in a specific industry and how it relates toinsurance and risk management.

“Specialization is important, either by industry or technicalmatter,” says Colburn, such as technical claim responses or crisismanagement and consulting opportunities. Claims management isanother important piece of the pie.

The main reason a risk manager needs a brokeris to navigate the complexities of the insurance world and todetermine how all of the client's unique risk exposures fittogether. “The whole reason we have a broker is to be knowledgeableabout the insurance markets and to have a relationship with thosecarriers that write our coverages,” says Sarah Perry, risk managerfor the city of Columbia, Mo. “I need them to be available,responsive and have good communication skills, and to understandall our risk as a whole. As a public entity we're a conglomerate ofa lot of different things.”

One or more?

Perry stresses that this doesn't mean the broker must specializein public entity risk, but rather should understand all areas ofexposure. Columbia has a power generation plant, a small airport, arailroad, a health department and many other areas of exposure thatpublic entity specialists may not understand. “We prefer ageneralist,” says Perry, who maintains a relationship with a singlebroker to provide that service.

“I know other public entities have multiple brokers, but we haveelected to just go with one,” she notes. The biggest advantage ofthis approach, she explains, is that it's simply easier to dealwith a single broker: “Multiple brokers are often asked to bid, or assignedspecific coverages; I just have one broker that helps coordinateall of it. One disadvantage is that you don't always get thatdifferent viewpoint that you'd get from another broker orconsultant.”

Although Pearce at Kelly Services says he maintains “excellentrelationships” with primary broker McGriff, Seibels & Williamsand Aon, which brokers a portion of its program, “our preference isfor one broker because we deem it more important to concentrate ourpurchasing power than to have an ongoing competitive dynamic. Thereare several outstanding firms that we don't now do business withbut with whom we try to preserve relationships. When weevaluate any broker, we're equally interested in the overallorganization and in the specific service team that would handle ourbusiness.”

Other risk managers need a tighter focus. For example, althoughNYU maintains the services of a single large broker for most of itsrisk, Liebowitz also relies on a specialist broker to handle thefine arts (“things that are in museums,” as he puts it) segment ofthe business. “Even though I have 98% of placement with one broker,the 2% they don't have is because as big as they are, they don'thave the expertise I need to do a great job,” he says. “The brokerI've chosen for that business is transparent and has significantexpertise and contacts in that field.”

And a specialist broker is essential in risksinvolving public utilities. “As a utility company, experience inour industry is particularly important,” says Karl Zimmel, manager,risk management services for Tucson Electric Power. “From myprevious jobs, I found industry expertise to be important in thetransportation sector as well. However, it wasn't as important fora manufacturer or distribution company.”

Can we talk?

Regular communication between risk manager and broker isessential for a successful relationship—although the definition of“regular” can range from multiple times a day to once a year.

“I speak to my brokers once or twice a day on various differentaspects of the placement,” Liebowitz says. “NYU is a fast-movingmachine and as it churns through its day of business, exposures canchange, sometimes for what we might not be covered for. I have aglobal empire, and it's managed by one broker. Things might be OKin New York, but not OK in Shanghai, or there's a questionovernight from Abu Dhabi. The broker either provides documentationor information.”

Other risk managers expect direct communication only on anas-needed basis.

“We meet with our broker whenever businesscircumstances call for a meeting,” says Pearce of Kelly Services.“In practice this works out to roughly 10 meetings a year, eventhough our main broker is in another state. We hold planningmeetings for major renewals, we visit all our underwriters inperson annually, we conduct periodic reviews of key events, and wetend to have the occasional additional meeting for specificsituations as they arise.”

To facilitate communication, some risk managers, such as KarlZimmel, prefer contact for the day-to-day account manager/executiveto be a former risk manager, “because they understand the dailyneeds and issues from my side of the desk,” he says.

Some meetings are mandated, of course, such as the quarterlymeetings contractually required between Sarah Perry and her broker,although actual meetings vary. “If we're not renewing, we may talkonce every couple of weeks, although there are times when we maytalk daily. A good broker likes to be in touch, even if they'rejust sending information or noting that you had a loss. I value therelationship when I know they're taking an interest beyond renewaltime.”

Because Perry recognizes communication is a two-way street, shemakes an effort to send the broker information about changes inexposures and other shifts so she can get their input on risk. Inthese cases, “they don't just place coverage, but are consultantson how to best handle exposure issues,” she adds. “I want them tonegotiate on my behalf, but also be involved enough that they havean understanding of what our risks are.”

Rather fly than fight

Assuming that everything is going well, a solid riskmanager/broker relationship can last for decades. But it isn'talways about performance, says Colburn. “Relationships play a bigpart, so if there is a change of management (CFO, risk manager,treasurer) on either side, it can be adeal-breaker.” Sometimes pricing, terms and conditions can enda relationship, or service-related matters can be cited.

Public entities are required to periodically put their keyservice contracts out to bid—in Missouri, the maximum is every fiveyears, although the public entity can choose to retain theincumbent broker, Perry says. She just wentthrough the process: A selection committee reviewed the six bidsand winnowed it down to three candidates, who they interviewed. Theprocess typically takes several months. Based on the review,Columbia switched brokers, based on a combination of service andknowledge.

“It's not just about price, although price is an importantelement,” she says. “We do our selection based on a percentage orpoints: price is about 30% of the decision. The rest is based onthe broker's knowledge, response and understanding of what weneed.”

For Pearce, whose business last switched brokers in 2007 afterthe previous broker had been in place for well over a decade, thedecision came down to the need for re-evaluation. “We felt that weneeded to enter into a 'master broker' relationship, both forreasons of cost and to keep the broker's best talent on ouraccount,” he says. “When we evaluate a new [broker] relationship,we have a special interest in how the broker's service offeringwill be sustained, month after month, once the salespeople andrainmakers have moved on to the next new business opportunity.

“As we evaluate our existing relationships, we consider whetherthe broker is doing what they promised, how they have shaped orinfluenced our carrier relationships, the quality and timeliness ofexecution and whether they have met the standard of being a trustedbusiness partner who adds value as a consultative resource,” headds.

Yet the decision to change brokers is often the result of theincreased complexity of the risk. Liebowitz recalls that when hestarted at NYU eight years ago, the university retained severalbrokers, the largest of which had handled the business “longer thandinosaurs walked the earth.” But as the program grew and becamemore complicated, “having it fragmented across different brokersdidn't work because claims can pass over several types of insuranceand carriers,” he says. “D&O, general liability, those kinds ofcoverage can overlap, and it's not in our best interest to haveeach coverage with a different broker and carrier.”

And when considering a new broker, although price is alwaysconsidered, it's seldom the determining factor. “My approach is tomake sure our broker receives adequate compensation for the amountof time and expertise,” says Zimmel of Tucson Electric Power.“Therefore, in a request for proposal I am leery about very lowquotes trying to buy the business. Insufficient compensation to thebroker would just set us up for insufficient service in the longrun.”

Words of wisdom

At the end of the day, the best way a broker can ensure alasting relationship with its risk manager partners is to focus onkeeping current with emerging risk issues, educating clients onthese changes and providing creative options to protect theirbusinesses against harm, says Colburn at Marsh.

“Risk managers want to be presented with choices and options,but in a thoughtful, creative way,” he says. “Then talk themthrough what's best for their situation. The more you act likethat, the better the relationship.”

When asked to boil it down to three main attributes, Liebowitzsays he looks for “seamless global service, transparency, andgetting the job done. Understand my risk and make me feel like theonly client.”