In early July, we published a piece called 9 Things Brokers do that Drive Risk Managers Crazy.  Now some veteran P/C commercial brokers, including three multiple-award winners, weigh in with the 13 things risk managers or their companies do that sometimes make brokers scratch their heads.

1)  Conducting multi-broker quoting competitions.

“I think people tend to treat arranging insurance like shopping for a new car or getting estimates to paint the house. But it’s a complex subject that has many nuances and a language all its own.

The issue that I have is that a market competition tends to place greater emphasis on the going-in cost — what the premium’s going to be — than it looks at qualifications to manage the organization’s long-term total cost of risk.

Insurance premiums are frankly the tip of the iceberg if you’re thinking in terms of total cost of risk.  When you execute a broker quoting competition, I think it risks sending mixed messages in the marketplace, because you’re going to have different intermediaries that are each presenting the risk in their own way.”

— A multiple Power Broker award winner

And tacking onto that…

“When insurance is viewed as a commodity, the deciding factor is price, not value.”

— A winner of the Risk & Insurance® Risk Innovator award and Power Broker award, whose clients have also been named Risk All Stars

2) Moving the goal posts.

 “I am sure most brokers want to do a great job for the customer.  You say, okay, what’s the goal and what’s the renewal strategy? They say, ‘We’ve had some losses but if we could hold to a flat rate that would be awesome.’

Stop moving these around.

And we’ll say, ‘Okay flat rate outcome’ and then we do everything to get to a flat rate. Then they say, ‘Oh by the way my CFO needs a ten percent reduction.’

You took your shot with the carrier and you did everything you could to get this great outcome and then nobody’s happy. The carrier’s unhappy, the client’s unhappy, you’re unhappy.

The really effective risk managers know what leadership is going to be looking for, they know internally what is being expected and what is being budgeted and then everybody is aligned.”

– A multiple Power Broker award winner

3) Thinking the risk manager’s interests are perfectly aligned with the carrier’s.

“The carriers will suck up to the clients and they might present something like ‘we did this just for you Mr. Risk Manager.’  But the clients that deeply believe they can do everything directly or without us are just wrong, to be honest.  We have a lot of juice with these carriers.  The relationships are big and important. And I’m not just saying big brokers.

Good brokers, that have the relationships and are experts in their field, get better outcomes.  The clients that believe that all of their interests are aligned with the carriers?  It’s just nonsense. The carriers will make more money if they don’t pay claims.

This “Oh, we’re all on the same page and we’re such happy partners and we want to go to their gig in Florida and all of this stuff and we are on their advisory board and I just love this carrier.  Well, you know, you can have a relationship but don’t think that your interests are aligned.”

“Some of the clients are so convinced that they can do that better than us. The reason the carriers find the brokers so annoying sometimes is that we are such steadfast advocates for the clients. Sometimes clients will be talking to carriers directly and undermine their own best interests.  ‘Oh we can live without such and such and so and so.’ And it is just like, ‘Why would you do that?’ ”

— A multiple Power Broker award winner

Adding to that sentiment: “Being too busy to find time to meet but willing to make time for golf/dinner/booze/cigars.”

— A broker with more than 28 years’ experience in insurance and risk management

4) Missing the big picture.

 “So many buyers obsess over the going-in premium. I’m not denying that everybody needs to manage cost. But when a buyer focuses so heavily on premium, they may underestimate other direct costs, such as deductibles or self-insured retentions.

Or coverage exclusions and limitations that create gaps in protection.  If the buyer skimps on the limits they buy and then has a big settlement or judgment that outstrips the insurance, that’s a direct cost.  And if that buyer doesn’t spend enough time managing its loss costs and hemorrhages from claims, that’s going to drive future insurance pricing.”

— Multiple Power Broker award-winning broker

5) Providing sloppy or incomplete data.

”You work really hard to get good deals for them and they say, ‘Oh by the way, our exposure data was wrong.’ And then everything goes out the window.”

“Not being honest about loss history & details.”

“Withholding Property COPE details – Construction, Occupancy, Protection and Exposure.”

— Multiple brokers

6) Not leveraging their broker as a strategic partner.

“We’ll have clients come to us and say, ‘Oh look, we entered into this contract; would you review it? Does our insurance apply here?’ Once the thing is already inked and baked, it’s too late. We brokers need to be at the table when the buyer — the policyholder — is considering any kind of a new initiative, whether it’s a contract, an acquisition, a divestiture. Maybe the organization’s thinking about building something — construction or a renovation — or maybe it’s entering a new area of operation. That’s when we need to be at the table: in the planning stages.

Insurance is really the icing on the cake, you buy that as a complement to everything else that you’re doing to manage risk, so that you can hopefully sleep at night.”

7) Moving too slowly and not appreciating how much time it takes to get some things done.

“Obviously things change. You may have had the merger or the acquisition right before renewal that changes things.  But clients will say I want my policy in 60 days or I want it within 30 days of the renewal but then they give us the data at the last minute. We can’t do it.

Please give us good data well in advance and communicate to us what the goals of the firm are. Open communication, good quality data, and doing things earlier rather than later.”

“Slow response time on critical issues. A lack of understanding of all the steps necessary and that it’s really only once the risk managers gives the answer that the whole process starts.”

— Multiple brokers

8) Aligning with generalists.

“I think it would be great if more buyers would look at the value of specialization. You look at surveys about any industry or professional service and the number one attribute is, ‘We want to work with somebody who understands our business.’

Everybody says that. Well, it should follow that the broker who’s spent the time to really go deep, and understands the strategic landscape of the buyer’s industry, is going to bring much greater value to the table than the generalist.”

— Multiple Power Broker award-winning broker

9) Risk manager isn’t empowered.

“I go into a lot of organizations — Fortune 500s — and I basically get a chance to go in and see what’s right and wrong in the organization, how they are structured and what their culture is like. And one of the big things I see is that a lot of times the buyer isn’t empowered at all.

They don’t have the budget they need to hire the right people. You may have a great idea on how to save them millions of dollars and they might totally agree with you.  But they just aren’t being funded properly enough by their organization. They may lack the political capital that is needed to effectuate change whether it is cultural, or spending money.

— The head of claims consulting for a top five brokerage

10) Heavy internal silos.

Along those same lines what I see a lot when I go into these companies, there are heavy silos in there.  If you ask me what are the things that drive me crazy about buyers it would be that and the buyer would admit it, they are siloed sometimes.  Sometimes the buyer is reporting to treasury and sometimes the buyer is alone in risk management.

Sometimes they are reporting to HR even. A lot of times you go into a company and safety is on one side, claims on the other. You go in and try to effect change and safety is running the show, or HR is running the show and it is really hard to get people to consensus. It’s something we have to work with. You have to go in and realize that most companies do have some kind of silo going on internally.

— The head of claims consulting for a top five brokerage

11) Inadequate staffing. 

Every time I do a risk process optimization, I go off and look at the clients. They want to know are we adequately staffed?  You know they’re not. They know they’re not. But you can’t explain to finance why an extra head count is needed. And that’s really hard. There is no one study to show, if I hire one person, will my losses get better internally in the risk management department. We try to make a business case and say well these people worked in these six programs and each will work 200-300 hours will save this much money and there’s our ROI. But that’s really tough to do.

It’s tough when buyers are inadequately staffed. And because they are inadequately staffed the people they do hire, and we see some great people at our clients, but of them are not as seasoned as you would find at a TPA or a broker or a carrier. Many times they don’t have that insurance background, because our risk managers are inadequately budgeted and they can’t hire the top-tier talent in the industry.

— The head of claims consulting for a top five brokerage

12) Not appreciating the effort it takes to get certain things done.

13) Not even buying their broker a beer! &

Buy your broker one of these. They probably deserve it. 😊