5 Ways to Botch your Risk Management Program
There are a number of industry tips to help you build a successful risk management program. Even if you do everything else right in building your program, certain pitfalls can completely derail your efforts. Check out these quick “DON’T’s” for your risk management program.
1. Set it and forget it.
Your business does not have the same challenges today as it did yesterday. Even if you haven’t had major changes internally, the external environment is constantly changing the risk profile you should be insuring.
2. Have a “Broker Showdown.”
Insurance brokers are usually evaluated on two competencies: customer service and the ability to negotiate favorable pricing and coverage terms from the insurance companies. The insurance marketplace is a funny thing. Just as the clients judge brokers on their responsiveness and customer service, the insurance carriers also judge brokers. Frequently carriers will offer different pricing based on the history and relationship with each broker on the same client risk profile.
The closed market nature of the Property & Casualty industry prevents multiple brokers from engaging the same insurance carrier for a quote on behalf of a single client. Because of this, in a “broker showdown,” it’s common to have a scenario in which the wrong broker is trying to get a quote from the right carrier…but they just don’t have the relationship to pull it off. The best way to purchase insurance is to interview brokers and then pick one to represent you to the entire marketplace.
3. Spread the Wealth.
Businesses often have many insurance brokers as clients, so there is a natural tendency to want to break up and spread out coverages among those brokers. The problem is this creates a situation where the “left hand doesn’t know what the right hand is doing.” As a result, you will be inundated with emails from the different brokers, carriers and claims adjusters when a complex claim arises. In this communications nightmare, the best case scenario is often mild frustration. In the worst case scenario, you will have claims denied because of gaps in coverage or conflicting terms.
4. Earn a Reputation as a Price Shopper.
Insurance is often viewed as a commodity; unless of course, you’ve been through a complex and difficult claim. Each carrier offers different terms and provides differing levels of claims service but often these change as human capital moves from carrier to carrier. As a result, there are logical times and reasons to change insurance companies.
But, moving carriers every year to try and get the lowest price possible is a quick way to get a bad reputation. Underwriters are judged on the internal resources they use when quoting business, and so if you get a reputation as a price shopper, the carriers have every right to refuse to quote your business. If you’re in a difficult market or have a tough loss history, this could result in you actually getting WORSE pricing than if you just rode the occasional increases during a hard market.
AUTHOR’S NOTE: We’ve been in a soft market for almost a decade, so there’s a good chance you haven’t had any pricing pain for a long while.
5. Allow Broker Complacency
Most often, business owners don’t know what to expect from their broker. As long as the boss isn’t hearing complaints from his subordinates, the general consensus about insurance is “leave well enough alone.” The problem with that thinking is that you only find out your insurance is broken when you need it to pay a claim…and then it doesn’t pay that claim! There are several signs your broker may be too complacent, here are two:
- Your renewals don’t seem to take up much time. How far in advance of your renewal, is your broker meeting with you to go through a detailed checklist of your business, evaluate how it’s changed, and/or meet with key personnel to understand the needs and business plans for the upcoming year? If your renewal feels like it’s on autopilot, then “Houston, we have a problem.” As I said earlier, I’m not an advocate of jumping around, but if your renewal discussion isn’t starting six months prior, there is a good chance you’re being underserved.
- Please, leave a message. Insurance is a customer service business, but brokers love to find ‘low maintenance’ clients; they’re more profitable. While there’s nothing wrong with that, it’s possible that you have become too low maintenance and your broker simply passes your needs onto a junior colleague.