RMs Put Heat On Brokers For Options

Clients, in turn, are looking to their brokers to cut or cushion the blow of their increased premiums through loss control efforts and detailed, completed forms to make sure their exposure is priced and written properly.

Large commercial multinational clients are also looking to brokers to help make their businesses more secure in the face of a catastrophic incident, brokers note, with recent events creating a new reality in the area of risk management.

"The need to communicate with our customers and prepare them [for the anticipated increases] has never been greater in the 30 years I have been in the business," said Mario Vitale, Willis Groups executive vice president for global sales and marketing.

What has changed "is our approach with the client–that is, to tell them this is not a short-term fix," observed Charles L. Ruoff, senior vice president and chief marketing officer with Chicago-based insurance broker Acordia Inc., a subsidiary of Wells Fargo of San Francisco. "They need to change [their insurance buying] to a longer-term strategy. We do not see the current market requirements easing in the next 36 months."

Clients generally know what is happening in the market–what they want is direction, said Randy Nornes, managing director of Chicago-based Aon Risk Services.

Brokers must lead buyers through an education process in deciding where to place risk, said Glenn Buser, managing director of the risk-consulting practice for New York-based Marsh.

Even prior to Sept. 11, insurers were already going back to the basics of underwriting and raising prices as a result–the terrorist attacks accelerated that process, observed Jim Gault, vice president of Arthur J. Gallagher's brokerage service division, based in Itasca, Ill. Soaring rates have resulted in a busy time for the brokerage's captive division, which he described as "swamped" with business.

The brokerage is looking to place good risks that exhibit sound safety programs and attractive claims records in self-insured programs, Mr. Gault said. However, while large-business accounts have always looked at their own programs as an option, middle-market risk managers are now also considering joining pools or captive associations. There is "a ton of it going on," he noted.

Risk managers are also concerned with disaster planning. It is essential to come up with a number of business interruption scenarios, then plan how to deal with each situation, observed Mr. Buser. The reality of Sept. 11 made firms aware of the need for business continuity arrangements, plans to evacuate locations, and emergency response planning.

"The plan is only as good as the capability you place in employees and management," said Mr. Buser. "Clients realize they need to train and define each employee's role and responsibility in the plan."

Part of the planning process involves setting recovery objectives, which involve the cost of getting up and running again, as well as securing supply alternatives should a vendor become disabled, or if transportation shutdowns occur.

Insurers demand to know the depth of such recovery plans before agreeing to write an account, Mr. Buser added.

Another risk management service in demand is modeling, which not only determines the potential exposure, brokers point out, but also helps clients decide how much their business can handle if they assume all or part of their own risk.

"The goal is to try to be solution-neutral," Mr. Nornes said.

"We're in a position where I hope we bring value to the table, and not just to buy cheap insurance," Mr. Ruoff said. "This is a time where brokers really show their mettle."

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, May 13, 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.