Magazine article Risk Management

Going with the Little Guy

Magazine article Risk Management

Going with the Little Guy

Article excerpt

The last 20 years have seen enormous consolidation of the insurance broking market and, in particular, the major American brokers, which have truly globalized the business. They have acquired retail insurance brokers very aggressively not only in the United States, but also internationally. At the same time, they have also acquired the majority of what were once exceptionally good independent London wholesale brokers.

This strategy has successfully "bought up the competition" and those broking firms have done an exceptionally good job in persuading retail clients that there are no alternatives to the global broker/commoditized approach. This is undoubtedly untrue and as is often the case, when looked into more deeply, the "bigger is better approach" often ends up costing dearly.

When dealing with a large corporate client, there are two very distinct functions that need to be fulfilled. Very often these functions are diametrically opposed and the skills of people that are needed to fulfill the functions are similarly very different. The role of the retail broker involves day-to-day account management, administration, provision of insurance documentation, etc. Typically, due to the retail workload, a local retailer will only be able to handle one or perhaps two large accounts. This means that he or she will undoubtedly be in a silo from that particular client's perspective, i.e., not constantly seeing different problems from different clients and finding solutions from global markets for those problems. Furthermore, local retailers tend to--by necessity--be very industry-focused and accordingly do not always have the breadth of client base to use, for example, a solution gained from a electricity company in Mexico for a mining company in South Africa.

There is also a requirement for a strategic advisor who is centrally responsible for the overall design, structuring and placing of a customer's large complex insurance coverage. The natural home for this advisor is London, which remains the main gateway of access for international clients to the worldwide insurance market. This role is significantly different from the role of the retail insurance broker. It requires up-to-date knowledge of the world insurance marketplace and the daily experience of placing large corporate business in markets ranging from London, Europe, the United States, Bermuda, Asia and elsewhere. …

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