IRMI Update—Issue #173
An E-mail Newsletter for Risk and Insurance Professionals
ISSN: 1530-7948
November 28, 2007
In This Issue
Message from the Editor
Colleague,
Risk professionals have a language all their own. It is filled with acronyms,
unique words and phrases, and even different meanings for some common words.
To help translate this "insurance-ese," as I like to call it, IRMI first published
the
Glossary
of Insurance and Risk Management Terms in 1978. I am delighted to
announce that the 11th edition is now available, and I believe it to be the
most up-to-date and comprehensive insurance glossary available.
The IRMI
Glossary
of Insurance and Risk Management Terms defines more than 3,100 property,
casualty, life, and health insurance terms, as well as related risk management
concepts. It also translates nearly 1,000 acronyms and abbreviations, from AAA
(American Academy of Actuaries) to YRT (yearly renewable term), and includes
a directory of state regulators and industry associations. This glossary is
a great tool for both seasoned practitioners as well as newcomers to the business.
It would be a welcome holiday gift for top clients who could use it to relate
to what you do and further understand what you say. Stamp your firm's name on
the inside cover to remind readers of your firm every time they use it.
If you subscribe to IRMI publications in Sage or
IRMI Online,
you have access to the IRMI glossary. If you don't get it electronically or
you would simply like a print version for your desk (or your client's or assistant's
bookshelf), you can learn more about it and
purchase
a copy.
In the United States, we just enjoyed the Thanksgiving holiday. If you reside
in this country, please accept the best wishes of all your friends at IRMI for
a happy and safe holiday season. Regardless of your nationality, I sincerely
thank you for subscribing to IRMI Update.
Have a great day.
Jack
Jack P. Gibson, CPCU, CRIS, ARM
President
IRMI
Risk Tip
Meet with Underwriters to Get the Most from Your Marketing
Efforts—Marketing your account involves the broker, risk manager, and
underwriter working together to arrange a program that will meet your organization's
risk financing goals. Face-to-face marketing will invariably yield the best
results.
A meeting gives you the opportunity to sell your account. You have the unique
knowledge to put your account and the organization's commitment to sound risk
management principles in the most constructive framework. This can increase
the underwriter's comfort level with your exposures while providing a clear
understanding of your needs and expectations. It gives the underwriter the opportunity
to ask questions and hear answers directly while you have the opportunity to
judge the underwriter's level of commitment, eliminate unrealistic expectations,
and work through potential issues.
Plan to maximize face time with the underwriter. Provide the underwriting
submission well in advance, then be prepared and know the message you want to
deliver. You can gain the underwriter's confidence and have a positive impact
on the design and pricing of the program if you demonstrate a clear understanding
of your organization and its issues, a good knowledge of the insurance industry,
a commitment to sound risk management practices, and an open communication style.
After meeting with underwriters, you will have a general idea of market reaction
that will allow you to share market feedback including any problems, potential
coverage issues, and unexpected price increases with your management.
Drawn from Practical Risk Management,
Topic A-5, Marketing a Large Account.
For
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Suggest a Risk Tip.
Send us a practical tip (less than 300 words) for identifying and managing risks,
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What's New in Your IRMI Library
We have recently updated a number of the reference manuals in the IRMI library
and published new issues of
The Risk Report and
Captive Insurance Company Reports.
To make sure you don't miss any of this new information take 30 seconds to scan
the "What's New" summary page.
For
IRMI Online Subscribers
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SilverPlume Sage subscribers
New Expert Commentary
There are now nearly 1,000 risk management and insurance articles on IRMI.com.
Below you'll find summaries of some recent additions with links to the articles.
Quickly Identify and Prevent Coverage Gaps
How long would it take you to analyze more than 180 umbrella or excess policies?
You're just a few clicks away from having it done for you.
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Table of Contents.
Your View—Bidding an Insurance Program
IRMI Update 172 listed some guidelines for
bidding an insurance program in a soft market. Readers were asked if they thought
now is a good time to bid, if one agent/broker or several should approach the
marketplace, and how often should an insured wait between seeking competitive
proposals. Some of the responses received are shown below.
-
From my experience, choosing your agent or broker ahead of time and having
one firm go to the marketplace on your behalf rather than using a competitive
insurance proposal process with multiple brokers, will not yield the best
results.
Interviewing and selecting 2 to 3 agents/brokers and equitably allocating
qualified insurance markets to each participant is the approach we prefer
and regularly employ on behalf of our clients. The participating agents/brokers
should be selected based on their servicing capabilities, insurance markets
represented, and experience with similar risks. Depending on the nature
of the risk involved and the insurance market conditions, policyholders
may need to limit the participants to one or two agents/brokers and, perhaps,
one direct writing insurer. Proposals are then judged based upon the scope
of coverage, pricing and the insurer's services.
From my perspective, a process conducted in this manner will afford the
greatest level of competition and the greatest amount of insurance company
participation thereby providing the policyholder with the best choices.
—Charles Cox, President, Aldrich & Cox, Inc., Orchard
Park, NY
-
In a soft market like the current one, I think the client is best served
using one broker to obtain multiple insurer bids, rather than having multiple
brokers in the marketplace on their behalf. As a marketer, one of the first
questions an underwriter asks me upon receipt of my submission is, "Do you
control the account?" From their standpoint, this lends credibility to their
opportunity to potentially win the business, especially in the current environment
where double-digit reductions are common. But more important, this may come
as a shock, but underwriters do talk and keep records of submissions from
past years. If upon receipt of a submission, an underwriter finds that they've
received a client's submissions from several different brokers each of the
past few years, it goes to the bottom of their pile. Especially as a client's
insurance program becomes more complex, the best practice is for the client
to select a broker they trust, and to invest their chosen broker with the
authority and responsibility to get the job done best.
—Robert Meder, Vice President, Hilb Rogal & Hobbs
of New York, LLC, New York
-
Your comments are valid. There is also a danger to bidding during a soft
market due to Insurance Company underpricing, which may result in double-digit
percentage increases at the first renewal. You may sacrifice a solid relationship
with your current insurer just to have to weather it out with a new insurer
once the market turns upward.
—John Clark, Vice President, Paull Associates, Wheeling,
VA
-
In my 15+ years as Director of Safety & Risk Management at a Fortune
200 consumer products company, I bid out many insurance programs, using
both 1 broker and multiple brokers. In my experience, for programs where
it is possible to use multiple brokers and assign each a set of markets,
the process produces superior results to using just 1 broker to market coverage.
What is gained is several different perspectives on program design and coverage
terms & conditions that a single broker is not usually capable of providing.
—Fred Travis, Principal, Risk Management Consulting,
Labadie, MO
-
Jack, I'm not a huge fan of the rebidding scheme. If you're on the ball
and understand the marketplace and its ability to assume risk, then you
know whether you're placement is competitive.
No question that going out to either prove your program, or to actually
look for a competitive bid is all very well and good, but the more dynamic
and difficult the risk is, the more underwriters are going to want to see
substantial amounts of information (even in this marketplace). I've always
believed that a submission should be sufficiently broad in every aspect
that the underwriter ends up literally either saying yes or no.
That puts the onus on the broker/agent to be sure that they know more
than the underwriter, and perhaps from a risk standpoint a lot more than
the insured.
—Peter Polstein, Somers, NY
-
I've found that a step toward a fair and successful process in program
bidding is to invite underwriters to your operations. Meeting and interviewing
of key personnel at field locations, touring facilities, and an introduction
to the field office record-keeping procedures gives underwriters a sense
of comfort. They appreciate the "hands-on" approach and get a very good
sense of the extent of control the insured has over his operations. Making
them an indirect part of an operation leads to a seamless process. Potential
underwriters also enjoy an invitation to the field, however, I've been known
to limit their time there.
—Joan Lynch, Consultant/Advisor, JM Risk Services,
Houston
-
Every 3 years is just about right for a bid/re-broke. That is unless
there have been major changes in my company, the market or underwriters.
I would never use a broker to run my bid. I prepare and run my own. I have
the expertise and experience. I would not preclude brokers from bidding,
but I find that even the biggest brokers disappoint with lack of flair in
designing a suitable program. I often wonder just how long brokers (and
some insurers) will continue to exist using their existing business models—I
would far rather chose specialist consultants for specific issues when I
need them. Brokers continue to disappoint me as they rarely live up to their
own hype!
—Peter Latham, Director of Risk Management, CIC Middle
East, Jeddah
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