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.

Advertisement




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.

Advertisement




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.

Advertisement




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

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.

Advertisement




Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.


R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.

Advertisement




We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?

Advertisement




Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.

Advertisement




Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.

Advertisement




More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]