In the realm of relationships,the bond between risk managers and their insurance brokers is rightup there with that of patient/doctor or lawyer/client. Many ofthese relationships last as long—or longer—than the averagemarriage, and the good ones are built on many of the same elements:trust, growth, reciprocity and good 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 intensely competitive insurance marketplace, it'sa relationship that gets re-evaluated regularly.

“We keep testing the relationship to see if they can go theextra mile,” says Michael Liebowitz, senior director of insuranceand enterprise risk management for New York University. “They haveto keep showing what the results are, based on the difficultquestions that are asked. This gives you an idea of howprofessional, how deep they are in terms of providing service tothe customer. They’re only as good as their last conversation withme.”

What Clients Look For

“We seek technical knowledge, professionalism, relationshipswith key parties in the insurance marketplace, administrativecapability (we issue thousands of insurance certificates and haveadmitted policies in 25 to 30 countries), and knowledge of us andour industry,” says Gary Pearce, vice president of risk managementfor workforce-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 us indesigning 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, there are a lot of variables in what individual risk managerslook for in a broker—from the “day-to-day blocking and tackling” ofissuing policies and insurance cards, to providing high-levelexpertise in a specific industry and how it relates to insuranceand 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 broker is to navigate thecomplexities of the insurance world and to determine how all of theclient's unique risk exposures fit together. “The whole reason wehave a broker is to be knowledgeable about the insurance marketsand to have a relationship with those carriers that write ourcoverages,” says Sarah Perry, risk manager for the city ofColumbia, Mo. “I need them to be available, responsive and havegood communication skills, and to understand all our risks as awhole. As a public entity we’re a conglomerate of a lot ofdifferent 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, orassigned specific coverages; I just have one broker that helpscoordinate all of it. One disadvantage is that you don't always getthat different viewpoint that you would 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 we evaluateany broker, we’re equally interested in the overall organizationand 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 segment of the business (“things that are in museums,” ashe puts it). “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 risks involving publicutilities. “As a utility company, experience in our industry isparticularly important,” says Karl Zimmel, manager, risk managementservices for UNS Energy Corp. in Tucson, Ariz. “From my previousjobs, 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 a global empire, and it's managed by one broker,” hecontinues. “Things might be OK in New York, but not OK in Shanghai,or there's a question overnight from Abu Dhabi. The broker eitherprovides documentation or information.”

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

“We meet with our broker whenever business circumstances callfor a meeting,” Pearce says. “In practice this works out to roughly10 meetings a year, even though our main broker is in anotherstate. We hold planning meetings for major renewals, we visit allour underwriters in person annually, we conduct periodic reviews ofkey events, and we tend to have the occasional additional meetingfor specific situations as they arise.”

To facilitate communication, some risk managers, such as Zimmelin Tuscon, prefer contact for the day-to-day accountmanager/executive to be a former risk manager “because theyunderstand the daily needs and issues from my side of the desk,” hesays.

Some meetings are mandated, of course, such as the quarterlymeetings contractually required between Perry and her broker,although other meetings vary. “If we’re not renewing, we may talkonce every couple of weeks, although there are times when we maytalk daily,” she says. “A good broker likes to be in touch, even ifthey’re just sending information or noting that you had a loss. Ivalue the relationship when I know they’re taking an interestbeyond renewal time.”

Because Perry recognizes communication is a two-way street, shemakes an effort to send the broker information about changes inexposures so she can get their input. In these cases, “they don'tjust place coverage, but are consultants on how to best handleexposure issues,” she adds. “I want them to negotiate on my behalf,but also be involved enough that they have an understanding of whatour risks are.”

Rather Fly Than Fight

A solid risk manager/broker relationship can last for decades.Public entities are required to periodically put their key servicecontracts out to bid—in Missouri, the maximum is every five years,although the public entity can choose to retain the incumbentbroker, Perry says. She just went through the process: A selectioncommittee reviewed the six bids and winnowed it down to threecandidates, whom they interviewed. The process typically takesseveral months.

After the review, Columbia switched brokers, based on acombination of service and knowledge. “We do our selection based ona percentage or points: price is about 30% of the decision. Therest is based on the broker's knowledge, response and understandingof what we need,” says Perry.

For Pearce, whose business last switched brokers in 2007, 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.”

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 severallongtime brokers. But as the program grew and became morecomplicated, he says, “having it fragmented across differentbrokers didn't work because claims can pass over several types ofinsurance and carriers.”

And price is seldom a factor when switching brokers. “Myapproach is to make sure our broker receives adequate compensationfor the amount of time and expertise,” says Zimmel. “In a requestfor proposal I am leery about very low quotes trying to buy thebusiness. Insufficient compensation to the broker would just set usup for insufficient service in the long run.”

Words of Wisdom

At the end of the day, the best ways brokers can ensure lastingrelationships with their 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.

“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 situations. The more you act likethat, the better the relationship.”

When asked to boil it down to three main attributes, NYU’sLiebowitz says he looks for “seamless global service, transparency,and getting the job done. Understand my risk and make me feel likethe only client.”