Management: extra protection

Risk management is such an important part of the way we interact with our clients today that one has to wonder why everyone isn’t doing it. The obvious answer is that the integrated managing of risks for a company isn’t initially an easy option for the broker, the client or the carrier. That, in turn, probably explains why so few businesses have a serviceable health and safety policy, let alone a rigorous business continuity plan.

Sadly many organisations come to appreciate the value of risk management only after a major claim, when they realise that insurance can mitigate only the financial impact of a major disruption to their business but it will not compensate them for far more damaging outcomes such as disaffection of staff or the loss of long-term client relationships.

Many businesses then attempt a top down directive to manage their risks and find that, on the whole, it doesn’t work. That’s because the process essentially needs to engage the hearts and minds of everyone from the board to the shop floor and without this level of universal ownership risk management methods simply don’t gain traction. Of course, someone needs to co-ordinate this process and few businesses can afford a full-time, risk-management specialist. So, that’s where the broker steps up to the plate.

Brokers who live in the real world will concede that their clients’ main, and possibly sole, priorities are trading successfully and making a profit. Anything that gets in the way of this is an irritation and a distraction. Consequently, it takes some tolerance and persistence to drive health and safety or business continuity up the agenda and, it seems clear, the only way to achieve this is to painstakingly convince CEOs and CFOs that it will contribute significantly to their bottom line. Building trust is central to this process.Since the aim of a broker is to become an integral part of the customer’s business and the first port of call in a whole swathe of activities from pensions and contracts of employment to business expansion programmes. And risk management has a massive role to play in building trust in a changing world.

Changing role

In this context the role of the broker has changed significantly over time. While traditional risks have been considerably reduced through better building quality, 24/7 security and the use of CCTV, fire doors and sprinklers, new risks are emerging every day. Cyber fraud, corporate manslaughter and environmental liability are growing threats to the modern business. Equally, keeping abreast of new legislation and ahead of knowledgeable and increasingly litigious claimants is a growing headache and the brokers who can alert and defend their clients from these dangers will be welcomed with open arms.

Valuable lessons

Education is a value-added feature that builds multi-level touch points through the client business. At Brett Randall, we run free workshops for clients on a variety of topics bringing them up to speed on what can go wrong and how to detect the key risks. In doing so, we are not only adding value to the policyholder but also playing a significant role for different sectors of the company. A workshop on corporate manslaughter will attract one audience; internet fraud another. Slowly, instead of one point of contact, we are able to build trust across the entire organisation – a bond our competitors will find hard to break.

New risk management techniques also impact on core corporate protection. Take, for example, the three key covers, which represent around 80% of the average company’s premium spend: fleet, liability and material damage. In each area, risk can be driven out and claims performance enhanced through the use of modern measuring techniques. Sophisticated systems for profiling drivers’ skills or bench marking performance trends result in practical programmes to reduce risk.

We still have some challenges to face in precisely how we rate better risks. Without an MOT or a driving licence no driver should be on the road, but how many companies are we insuring without even a serviceable health and safety policy?

Good risk management should set a business apart – the better the risk, the better the insurance return. But, with underwriters rating on narrow criteria, the better risks are not being consistently reflected. Insurers need to give greater weight to brokers’ presentations and the quality of information in determining rates. That means investing in a skill set and offering a meaningful underwriting role to the three-way partnership – not handing over the pen to an MGA.

Most clients are looking for security and stability. Budgeting for insurance and risk protection is important to them and it is eminently achievable within a long-term broker/client relationship. Building in a bonus escalator or a rate rebate can level the peaks and troughs of market premiums over an extended period and can also be an effective route to agreeing a three-year policy and the profitable continuity of business which benefits all parties. On the basis of long-term profitable business, carriers are also likely to be interested in providing risk-management funding – such as bearing 50% of the cost of installing a GSM alarm system.

Few would argue that the retention of clients is vastly more beneficial than a costly scramble for new business. Helping clients to manage their risk is integral to the sort of grown-up conversation which facilitates these long term relationships. ■

Ashwin Mistry is chairman of broker ‘club’ Brokerbility