Magazine article Risk Management

What's a Broker to Do?

Magazine article Risk Management

What's a Broker to Do?

Article excerpt

As risk managers in the United Kingdom talk about how insurance brokers help them in risk financing, they are uncovering just how mercenary and unsentimental the risk manager-broker relationship has become.

By and large, risk managers want from brokers only what they cannot get or do for themselves. What that amounts to is an ever-decreasing piece of the action. When they use brokers, risk managers impose strict value-for-money criteria by paying fees as opposed to commissions. It is a far cry from the days-and it was not so long ago-when brokers dictated to risk managers.

No longer can the broker rely on the loyalty of a risk manager who lacks the know-how to act without the broker's guidance. Today, experienced risk managers place the bulk of their business directly with insurers because they reckon they can do it just as well as the brokers. Consequently, risk managers have a good feel for the market, which is what brokers depend on most for their livelihood.

The risk manager for the Wellcome Foundation, David Ovenden, deals direct because it allows him to build better relationships with his insurers. He believes that insurers are more likely to concede partial premium reductions or broadening of coverage if the deal is personal. Moreover, if a broker were involved, he says, the insurers might not make concessions for fear that the broker would try to arrange similar terms for other clients.

Ladbroke's risk manager, Paul Chambery, says he uses brokers only for special overseas coverage. "We don't use them in the United Kingdom for general, property and liability covers that we can comfortably place ourselves," he says.

Indeed, the professionalism of today's risk managers in the United Kingdom is reflected not only in the decreasing use of brokers, but in the selective and sophisticated manner in which brokers are utilized.

Simon Hackett, risk manager for Plessey, says he goes direct to underwriters for personal lines so his staff can deal with ongoing policy needs rather than with placing coverages. At one time, he says, he was placing nearly F4.5 million of business with the aid of only one assistant, using brokers as the "placing extension" of the department. For the most part, risk managers in the United Kingdom use brokers for a variety of reasons, such as when the market is limited or crowded or when it is constantly changing. …

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