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Brokers

9 Things Brokers do that Drive Risk Managers Crazy

They may be well-intended, but brokers sometimes drive risk managers nuts with their behavior.
By: | July 11, 2018 • 7 min read

Your broker can be a lifesaver, but sometimes they may not always be doing what the risk management team needs.

1) Relentlessly pushing ancillary services

In full disclosure, I am happy as punch with my broker.

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With that said, my gripe with the industry generally speaking is their, at times, relentless marketing of potential candidates. If they find you are happy with your broker, that is not enough; you then get inundated with a myriad of outreach calls related to ancillary services they provide. You add that to the W/C service trolls, LMS, data, ERM etc. folks and it is literally like guarding a modest hen-house from a pack of wolves.

— Zachary Gifford, director, system-wide risk management, The California State University

2) Not offering their best advice

I’m very happy with my broker team now. That is because I made the changes to the team quickly when I wasn’t satisfied with a particular team member.

Not offering their best advice and standing by while a client makes a poor decision that they (the broker) know is a bad idea. I consider our broker to be integral to our risk management mission and we will succeed or fail as a team.

When a broker tells me after a mistake has been made that they would have made a different decision but “… that’s what you said you wanted to do,” that is really frustrating. If a broker knows the decision the risk manager is making is a bad one, then they need to have the courage to speak up.

— Jim Cunningham, vice president, enterprise risk management, Pinnacle Entertainment

3) Not looping in the risk manager 

A second frustration stems from brokers who have long-standing personal relationships with our executive management team and will communicate with those executives without including the risk manager.

Professional courtesy dictates that the broker should be including the risk manager in all discussions associated with business operations. Clearly there is value in reliable long-standing relationships between the business and the broker. *This concern was echoed by an award-winning higher education risk manager who wished to remain anonymous, who listed “Brokers overlook my requests thinking I am not that important within my organization,” as one of this top issues with brokers.

Back-channel conversations can create issues — such as who is calling the plays — that are not necessary. The risk manager must be part of every conversation that relates to the business.

— Jim Cunningham, vice president, enterprise risk management, Pinnacle Entertainment

“When a broker tells me after a mistake has been made that they would have made a different decision but, ‘… that’s what you said you wanted to do,’ that is really frustrating.” — Jim Cunningham

 

 4) Poor knowledge of the risk manager’s industry

While I understand and respect the impetus of making a sale, one of the frustrating things from the buyer side that most brokers are not cognizant of, is that most brokers are so intent on selling whatever line(s) they are in charge of that they do not spend the time necessary to listen and understand what the risk manager’s top-of-mind concerns are.

Jean Nkamdon, risk management and compliance manager, The Washington Post

I speak to brokers often, and every time they try to convince me they have the best solution for whatever line my business currently has. However it is seldom they actually tell me or share something relevant to my business/industry.

Risk managers are looking for strong partnerships and strong advisers with brokers. However, this is often lost when brokers cannot demonstrate an understanding of the risk managers’ industry, the business landscape and/or trends in that industry.

As a risk practitioner, my expectation of my broker is not only to place my policies but to also be keeping an ear on the ground, to apprise me of the developments in my industry or the market place in general that I should be aware of, so I can have data points I can draw upon when necessary.

— Jean Nkamdon, risk management and compliance manager, The Washington Post & Companies

*This concern was also echoed by the anonymous higher education risk manager, who listed “Lack of intuition and anticipating my needs” as a failure of some brokers.

5) A disconnect between the producer and the servicer(s) of the account

Another area of frustration is the disconnect between the producer and the servicing of the account. I often remind brokers vying for our business that however great the sale presentation is, the servicing of the account is what makes or breaks a relationship with a broker.

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As you know, most producers can drum up business all over the country and get credit for it, while servicing teams are often local/regional teams that actually do the work and are not often recognized for it.

It seems to me there is an inherent conflict built into the brokerage model where producers are incented to drum up business and drop it on the lap of the servicing teams, often with no coordination. This approach ultimately shoots the brokerage relationship in the foot, because unless there is coordination, the servicing team does not live up to the expectation the producing team has created.

I like to joke that I do not want to know how the soup is made, I want the soup. For illustration, each time I have a question, I would like to speak to one person who would coordinate the response to my inquiries from all the lines placed through the particular brokerage relationship.

If I have to chase each person on the service team in charge of a particular line, it is not efficient or helpful, because often situations might have implications that go beyond a particular line that could be lost when there is no coordination.

— Jean Nkamdon, risk management and compliance manager, The Washington Post & Companies

“I speak to brokers often, and every time they try to convince me they have the best solution for whatever line my business currently has. However it is seldom they actually tell me or share something relevant to my business/industry.”  — Jean Nkamdon

6) Speaking out of turn

Brokers often talk about acting as if they were the risk management department or risk manager — which is good — but it is a fine line. I really hate it when I am in a meeting and asked a question or series of questions and the brokers answer before I have a chance to respond.

While they may be acting on our behalf, they are not the risk manager, and I prefer to answer my own questions. They may not know as much as they think they do and sometimes puts the risk manager in awkward positions of having to correct them. It is particularly annoying if I have a senior management person present, because it not only feels like they are more interested in impressing them but it can also make the risk manager look unprepared or uninformed.

Thanks for asking — I feel better already!

—A long time health care industry risk manager

7) Acting like they know it all

It’s important to have an open, honest relationship with your broker/agent. That means being proactive about coverage, claims and changes that may need to be made to your insurance program as a result of your business relationships. Anyone who says “I’ve got this, no worries” each and every time you speak with them does a disservice not only to you, but also to your entity.

“Anyone who says ‘I’ve got this, no worries’ each and every time you speak with them does a disservice not only to you, but your entity.” — Marilyn Rivers

Broker/agent relationships are like any relationships you value. There’s a give and take and discussion as to the dynamic needs of your entity.

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Remember to ask questions, request information and set the parameters of the relationship you have with your broker/agent and your insurer. You are the client. They are your representative as you define your needs.
They’re your needs, not the broker/agent’s. Sometimes folks try and reverse who’s in charge. Remember, the entity within the parameters of the insurance contract they have adhered to is the entity in charge.

Also, it’s important to know your state and local ethics legislation. Risk programming should be transparent and adhere to those ethics regulations. Be wary of expensive dinners and golf games as a representative of your entity.

 — Marilyn Rivers, director of risk and safety, the City of Saratoga Springs

8)  Lack of attention to detail

The broker/client relationship is built on a thick crusty layer of trust. Sometimes, a risk manager wears many hats as a single expert within their organizations and we rely heavily on our broker(s) to be our “team”. Careless mistakes can be sometimes be benign but annoying and other times, they can be costly in terms of dollars AND reputation.

 

9) Inefficiencies

Cumbersome communications, inefficient document delivery, choppy process – all create wasted time for the client and diminishes confidence in the relationship. Things should always be made easier for the client – within reason.

An award winning risk manager in the telecommunications industry

 

What Risk Managers Appreciate

 

1) Forward Thinking

We need our brokers to work with us to stay ahead of the risk curve and during renewals ensure that the coverage we are booking not only covers our business today, but the offerings we invent tomorrow.

2) Understand our Business

Wolters Kluwer is a global company, active in 180 countries in different sectors. It takes time to understand our business. If you don’t, let us know so we can work together to bring you up to speed so you are best able to help our insurance partners better understand the risks we are asking them to underwrite. Once you do know us, grow with us, use your expertise, don’t assume we always want or need the same thing. Good barbers evolve to meet the needs of their client’s changing hairlines. Good brokers should do the same.

3) A Steady, Dedicated Team

We value consistent and seamless teamwork. We invest our time in helping your people get to know us and how we manage risk. When someone is poached, or moves, or is transferred, this disrupts the flow, not to mention our investment.  When these things do happen, which is part of doing business, manage it well. Protect against this risk by building the bench, particularly in high-demand spaces (cyber/privacy). Preparing our NextGen leaders and do-ers to take the helm should start yesterday.

Elizabeth Queen, Vice president risk management, Wolters Kluwer

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Cyber Resilience

No, Seriously. You Need a Comprehensive Cyber Incident Response Plan Before It’s Too Late.

Awareness of cyber risk is increasing, but some companies may be neglecting to prepare adequate response plans that could save them millions. 
By: | June 1, 2018 • 7 min read

To minimize the financial and reputational damage from a cyber attack, it is absolutely critical that businesses have a cyber incident response plan.

“Sadly, not all yet do,” said David Legassick, head of life sciences, tech and cyber, CNA Hardy.

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In the event of a breach, a company must be able to quickly identify and contain the problem, assess the level of impact, communicate internally and externally, recover where possible any lost data or functionality needed to resume business operations and act quickly to manage potential reputational risk.

This can only be achieved with help from the right external experts and the design and practice of a well-honed internal response.

The first step a company must take, said Legassick, is to understand its cyber exposures through asset identification, classification, risk assessment and protection measures, both technological and human.

According to Raf Sanchez, international breach response manager, Beazley, cyber-response plans should be flexible and applicable to a wide range of incidents, “not just a list of consecutive steps.”

They also should bring together key stakeholders and specify end goals.

Jason J. Hogg, CEO, Aon Cyber Solutions

With bad actors becoming increasingly sophisticated and often acting in groups, attack vectors can hit companies from multiple angles simultaneously, meaning a holistic approach is essential, agreed Jason J. Hogg, CEO, Aon Cyber Solutions.

“Collaboration is key — you have to take silos down and work in a cross-functional manner.”

This means assembling a response team including individuals from IT, legal, operations, risk management, HR, finance and the board — each of whom must be well drilled in their responsibilities in the event of a breach.

“You can’t pick your players on the day of the game,” said Hogg. “Response times are critical, so speed and timing are of the essence. You should also have a very clear communication plan to keep the CEO and board of directors informed of recommended courses of action and timing expectations.”

People on the incident response team must have sufficient technical skills and access to critical third parties to be able to make decisions and move to contain incidents fast. Knowledge of the company’s data and network topology is also key, said Legassick.

“Perhaps most important of all,” he added, “is to capture in detail how, when, where and why an incident occurred so there is a feedback loop that ensures each threat makes the cyber defense stronger.”

Cyber insurance can play a key role by providing a range of experts such as forensic analysts to help manage a cyber breach quickly and effectively (as well as PR and legal help). However, the learning process should begin before a breach occurs.

Practice Makes Perfect

“Any incident response plan is only as strong as the practice that goes into it,” explained Mike Peters, vice president, IT, RIMS — who also conducts stress testing through his firm Sentinel Cyber Defense Advisors.

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Unless companies have an ethical hacker or certified information security officer on board who can conduct sophisticated simulated attacks, Peters recommended they hire third-party experts to test their networks for weaknesses, remediate these issues and retest again for vulnerabilities that haven’t been patched or have newly appeared.

“You need to plan for every type of threat that’s out there,” he added.

Hogg agreed that bringing third parties in to conduct tests brings “fresh thinking, best practice and cross-pollination of learnings from testing plans across a multitude of industries and enterprises.”

“Collaboration is key — you have to take silos down and work in a cross-functional manner.” — Jason J. Hogg, CEO, Aon Cyber Solutions

Legassick added that companies should test their plans at least annually, updating procedures whenever there is a significant change in business activity, technology or location.

“As companies expand, cyber security is not always front of mind, but new operations and territories all expose a company to new risks.”

For smaller companies that might not have the resources or the expertise to develop an internal cyber response plan from whole cloth, some carriers offer their own cyber risk resources online.

Evan Fenaroli, an underwriting product manager with the Philadelphia Insurance Companies (PHLY), said his company hosts an eRiskHub, which gives PHLY clients a place to start looking for cyber event response answers.

That includes access to a pool of attorneys who can guide company executives in creating a plan.

“It’s something at the highest level that needs to be a priority,” Fenaroli said. For those just getting started, Fenaroli provided a checklist for consideration:

  • Purchase cyber insurance, read the policy and understand its notice requirements.
  • Work with an attorney to develop a cyber event response plan that you can customize to your business.
  • Identify stakeholders within the company who will own the plan and its execution.
  • Find outside forensics experts that the company can call in an emergency.
  • Identify a public relations expert who can be called in the case of an event that could be leaked to the press or otherwise become newsworthy.

“When all of these things fall into place, the outcome is far better in that there isn’t a panic,” said Fenaroli, who, like others, recommends the plan be tested at least annually.

Cyber’s Physical Threat

With the digital and physical worlds converging due to the rise of the Internet of Things, Hogg reminded companies: “You can’t just test in the virtual world — testing physical end-point security is critical too.”

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How that testing is communicated to underwriters should also be a key focus, said Rich DePiero, head of cyber, North America, Swiss Re Corporate Solutions.

Don’t just report on what went well; it’s far more believable for an underwriter to hear what didn’t go well, he said.

“If I hear a client say it is perfect and then I look at some of the results of the responses to breaches last year, there is a disconnect. Help us understand what you learned and what you worked out. You want things to fail during these incident response tests, because that is how we learn,” he explained.

“Bringing in these outside firms, detailing what they learned and defining roles and responsibilities in the event of an incident is really the best practice, and we are seeing more and more companies do that.”

Support from the Board

Good cyber protection is built around a combination of process, technology, learning and people. While not every cyber incident needs to be reported to the boardroom, senior management has a key role in creating a culture of planning and risk awareness.

David Legassick, head of life sciences, tech and cyber, CNA Hardy

“Cyber is a boardroom risk. If it is not taken seriously at boardroom level, you are more than likely to suffer a network breach,” Legassick said.

However, getting board buy-in or buy-in from the C-suite is not always easy.

“C-suite executives often put off testing crisis plans as they get in the way of the day job. The irony here is obvious given how disruptive an incident can be,” said Sanchez.

“The C-suite must demonstrate its support for incident response planning and that it expects staff at all levels of the organization to play their part in recovering from serious incidents.”

“What these people need from the board is support,” said Jill Salmon, New York-based vice president, head of cyber/tech/MPL, Berkshire Hathaway Specialty Insurance.

“I don’t know that the information security folks are looking for direction from the board as much as they are looking for support from a resources standpoint and a visibility standpoint.

“They’ve got to be aware of what they need and they need to have the money to be able to build it up to that level,” she said.

Without that support, according to Legassick, failure to empower and encourage the IT team to manage cyber threats holistically through integration with the rest of the organization, particularly risk managers, becomes a common mistake.

He also warned that “blame culture” can prevent staff from escalating problems to management in a timely manner.

Collaboration and Communication

Given that cyber incident response truly is a team effort, it is therefore essential that a culture of collaboration, preparation and practice is embedded from the top down.

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One of the biggest tripping points for companies — and an area that has done the most damage from a reputational perspective — is in how quickly and effectively the company communicates to the public in the aftermath of a cyber event.

Salmon said of all the cyber incident response plans she has seen, the companies that have impressed her most are those that have written mock press releases and rehearsed how they are going to respond to the media in the aftermath of an event.

“We have seen so many companies trip up in that regard,” she said. “There have been examples of companies taking too long and then not explaining why it took them so long. It’s like any other crisis — the way that you are communicating it to the public is really important.” &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected] Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]