4 Steps to Make Risk Management a Bridge to Business Success

By: Mark McGhiey | June 27, 2024

Mark McGhiey, CSP, CFPS, is the senior associate vice president of Risk Management and Client Services at Nationwide. He has more than 32 years of experience in the insurance industry and is also a Certified Safety Professional and a Certified Fire Protection Specialist. Mark lives in Des Moines, Iowa.

In the complex landscape of middle market business operations, risk management stands as a watch guard, protecting employees and organizations from the unforeseen and the preventable. Yet, despite its pivotal role, risk management is an area that many leaders still don’t think about as a key performance metric for a productive and healthy business. Instead, a robust and effective safety program often goes unrecognized and underappreciated.

Risk management professionals deal with this challenge regularly.

So, how can we make an “ah-ha” connection with leadership to better demonstrate the value of safety efforts and catalyze real change within the commercial operations we serve? It starts with learning what drives your client day-in and day-out.

For me, it was firsthand experience that led me to a 32-year safety career. In 1968, my father was killed in an industrial explosion, leaving my pregnant mother and two sisters to face the world alone. I was fortunate to have an incredible support system growing up, but the impacts this accident had outside of the workplace — with my family and community — are a big part of why the occupational safety major struck a chord with me in college. It’s more than just protecting the company and preventing accidents; it’s about sending workers back home the same way they came in each day and shielding their families from the negative impacts — something my own family has experienced.

Every risk manager and safety professional has their horror stories, but using those experiences and expertise to capture and retain clients’ attention is how we really make a difference.

1) The Value of Connection

I coach my team of loss control experts across the U.S. to begin every new relationship with a personal connection — try to find commonality with the professional you’re meeting with, whether it be context from pictures or décor in their office or something you learn about them through conversation. Simple, yes, but this goes a long way in gaining their interest and acceptance.

Next, demonstrate your preparation and credibility. The ability to walk into a meeting or site visit and speak the language of the industry and company, to show genuine understanding and insight into their specific risks, sets the stage for meaningful engagement. It’s the difference between being another “insurance rep” and being a trusted advisor.

We completed a presurvey at a metal fabricator in Illinois with roughly five acres of indoor plant space. Following our tour of the facility, we were introduced to the company’s president for a debrief, during which we emphasized the importance of enhancing its business continuity planning due to the increased risk for strong storms in the area.

The president smiled, walked our expert to the window and pointed to a row of houses within 1,500 feet of his office that were destroyed by a tornado three years earlier. He knew they’d skirted a potential disaster and appreciated our thoughtful analysis and insight into how to make them more resilient for future events. Now they’re a happy client.

2) Understanding ‘What’s in it for me?’

Every leader asks this question, consciously or not. Why should they invest more time and resources into risk management? How does this move their business forward? What’s in it for me (WIIFM)?

Once you’ve made a personal connection with the client and know what’s important to them, aligning risk management strategies with the company’s priorities — be it return on investment, operational efficiency, loss trends, or increased profits — ensures that the conversation is not just heard but heeded.

It’s about integrating their concerns into a risk management strategy that speaks directly to their interests. Focusing on the client’s WIIFM not only secures buy-in but also fosters a commitment to follow through with the recommended strategies.

This past November, we conducted a site visit with an account that led to several critical exposure concerns. During our time together, the company representatives also expressed frustrations with the number of tickets their drivers were receiving.

After hearing this, we took the time to teach the company’s management team how to better utilize their existing telematics technology to coach and improve driver behavior. The client expressed their gratitude and immediately got to work on our exposure concerns. Six months later, they’ve taken care of our concerns and continually seek our guidance on fine tuning their risk management programs.

3) Industry Specialization

More and more customers are looking for insurance and risk management partners that are entrenched in their specific sectors and understand the unique risks they face.

This is the essence of what it means to be a specialized carrier — having the right people in the conversation, individuals who comprehend the nuances of the industry and can offer tangible examples and lessons learned.

4) Get Creative

Innovation is at the heart of progress, and risk management is no exception.

Many carriers can make recommendations to improve an account’s risk profile, but most don’t take the time to consider the costs, resources and time requirements involved with completing the recommendations. This is where we’ve found that it is beneficial to provide options when it comes to risk mitigation.

Risk management experts, through creative thinking and an out-of-the-box approach, frequently discover simpler and more cost-effective methods for clients to achieve the same desired outcome. This not only saves time and money but also highlights the value of adaptive thinking.

Driving Home the Message

Effective risk management extends beyond mere policies and procedures. It lies in our capacity to connect the abstract with the personal, turning statistical data into compelling narratives that motivate action.

When a construction employee on a jobsite we insure fell from a roof while working near a leading edge last year, it was the safety program that turned a potential tragedy into a near miss. That day, an employee went home to his family, unharmed, because of the measures we championed and the buy-in we were able to achieve.

By emphasizing personal connection and tailored strategies, we can elevate the importance of risk management and foster a culture of safety that benefits everyone involved. &

Vermont’s Future Is Golden

Challenging market conditions are driving insureds to captives. Vermont offers a reliable domicile.

By: State of Vermont | November 21, 2024

Hard markets in commercial insurance lines have been a problem for years now. Many lines don’t show signs of softening, though some, like cyber, have ebbed over the past few years.

High claims volumes and costs have caused carriers to tighten terms and conditions, introduce new exclusions and increase premiums. A variety of different risks are included in this market tightening, and it’s affecting both public and private companies.

As Sandy Bigglestone, deputy commissioner for the State of Vermont’s captive insurance division, explained, schools, churches and other nonprofits are contending carriers are “excluding sexual abuse and molestation from coverage for a lot of these types of entities. These organizations understand the risk and the public needs to have confidence the organizations are addressing the risks, so they must have the coverage.”

Though many commercial lines are affected, property has perhaps been hit the hardest. Increased claims, inaccurate property valuations and other challenges have caused insurers to tighten their books in recent years. 2024’s spate of hurricanes will likely make matters worse.

“There continues to be challenges in the commercial market,” Bigglestone said. “Some companies are coming to us with risks that they say they’ve been self-insuring on their balance sheet, and why not transfer that to a captive to receive greater benefits?”

Consistency and Stability

Sandy Bigglestone, Deputy Commissioner for the State of Vermont’s Captive Insurance Division

With the commercial insurance market so unstable, companies are turning to captives to house their exposures. Vermont, a long-time domicile, is getting increased attention because of their strong reputation and their leadership as the top domicile worldwide.

“All stakeholders enjoy the stable political and regulatory environment Vermont has to offer to operate in,” Bigglestone said.

Of course, a lot of consideration goes into deciding whether or not a captive is the right choice for a particular company. Businesses need to assess their exposures and their books to make sure they can adequately operate a captive.

There are significant advantages, however. “For low frequency, high severity risks, captives can access the reinsurance markets directly, so it’s very attractive for businesses to put a captive in place,” Bigglestone said.

And carriers are more accepting of captives as part of a broader insurance program.

“Captives are changing the relationship businesses have with commercial carriers,” Bigglestone said. “Commercial carriers are wanting to see companies with skin in the game; therefore, the relationships have evolved to be less transactional and more strategic.”

Balancing Bureaucracy

With 76 global domiciles, companies have a lot of options when it comes to selecting a captive partner. “Captive insurance domiciles compete globally for the business,” Bigglestone said. “If you were to put all 7,000-plus captive insurance companies around the world, all in New York, it wouldn’t have the same economic impact as 700 captives in Vermont does. The captive insurance industry is very important to our state and we will continue to support it in any way we can.”

Businesses should look for domiciles that balance a need for quality regulations with a process that isn’t overly bureaucratic and is seamless for business owners to navigate.

“Companies are attracted to an environment with quality regulatory standards and a stable regulatory environment,” Bigglestone said. “Vermont sets the regulatory standard in terms of financial analysis and examinations.”

In addition to quality regulations, firms will want to seek out a domicile that is agile enough to license captive insurance companies that fit their unique needs. It is important that a domicile have firm but fair regulation and the experience to consider new ideas and implement them. Companies must consider a variety of factors when choosing a domicile and not everyone will be the right fit for every company.

“You have to consider the captive owner and the industry sector that that owner operates in, as well as the insurance risks that are going into the captive program,” Bigglestone said. “Captive laws and regulations have to have a reasonable degree of flexibility to accommodate all the varying needs of owners and then impose rules based on the merits of each captive program.”

She added that creativity is a critical part of the process: “The ability to vet concepts and ideas with trusted individuals is key to having quality standards,” Bigglestone said. “And it can make captives appealing to insureds who are tired of commercial carriers not meeting the needs of the business, and who desire more control over their insurance programs.”

“When you think about the commercial marketplace, commercial insurers are supposed to operate in each jurisdiction in a competitive manner. Commercial carriers often look the same. They sell auto coverage to anyone with a driver’s license. The rules and regulations imposed upon commercial insurance companies are designed to be more formulaic for that reason,” Bigglestone said.

“Uniform regulatory standards apply to commercial carriers for the protection of the policyholders. These are standards all insurance regulators focus on, and standards captive insurance regulators need to understand, but with a specialized focus.”

A Quality Domicile Built for the Future

A combination of experience, regulatory standards and talent make Vermont a top domicile for companies looking to form a captive. The longevity of licensing captive insurance companies for over forty years is a testament to the quality work they’ve provided in the past and will continue to provide for many years to come.

Vermont’s reputation has helped the state attract and retain top captive talent, ensuring the businesses it serves are in good hands. The state has 32 employees dedicated to captives, and their average employee retention is 15 years. The Vermont Captive Insurance Association, the largest captive insurance trade organization, also helps companies connect with professional services needed to make their captive successful.

“There’s a whole host of service providers with proven expertise right here in Vermont,” Bigglestone said.

Taken together, Vermont’s resources, expertise and talent make it a prime domicile. They’ve been on a growth trajectory over the last few years and that’s unlikely to change anytime soon. Companies can trust their captive will be in good hands when they choose Vermont.

“Vermont has always competed on quality,” Bigglestone said. “We do have a mission and that hasn’t changed in over 40 years. It’s to maintain a system, or domicile that attracts quality business to Vermont, to promote our reputation in the industry, and to uphold a regulatory framework to protect the solvency of the companies that choose to place their business here.”

To learn more, visit: www.vermontcaptive.com

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with State of Vermont. The editorial staff of Risk & Insurance had no role in its preparation.

The State of Vermont, known as the “Gold Standard” of captive domiciles, is the leading onshore captive insurance domicile, with over 1,200 licensed captive insurance companies, including 48 of the Fortune 100 and 18 of the companies that make up the Dow 30.