Rating Your Risk Management Team
There are two ways to rate your risk management team. See how they rank on the service scorecard provided here, or wait and see. There is a lot more risk involved in option two.
To simplify scoring, let’s group the major points of performance into five action categories and assign a value of two points to each. In reality, each category can be worth hundreds of thousands of dollars — sometimes more. But by the standard here, a perfect score is 10.
The lower your risk management team scores, the higher your risk. The higher the team scores, the more value you are receiving for your insurance dollar. If your team finishes below 8, you should consider hiring a new broker — someone who knows that value is more than finding the lowest insurance rate.
Performance Category I: Business Comprehension
If you’re in the construction business, look at your insurance broker’s shoes. Are they muddy? Is there dust on the cuffs of his or her slacks? You better hope so. That means your broker has been to your work site, seeing firsthand the risks your company and employees face on the job.
If your business is manufacturing, has your broker been through — not just to — the plant? Are your production processes, procedures, and policies, as well as products, familiar to him or her?
Retail operations require brokers to be more than credit-card carrying mall shoppers. Knowing how to buy is different from knowing the layers of risk that lurk behind each sale. Has your broker been to your primary locations — from warehouse to outlet or store?
Solid insurance advice is based on a solid understanding of your business. The best brokers talk the talk and walk the walk of the companies they serve.
Score 0 if your broker shows no sign of understanding or interest in your business. Circle 1 for occasional insight and annual renewal-time visits. Score 2 if your broker knows your business from the front line to the bottom line and comprehends your exposures.
Performance Category II: Loss Analysis
Like the proverbial “permanent record” that threatened to haunt you for foolish misdeeds in your early school days, your company’s loss history can have costly long-term consequences — unless you have the right insurance broker.
The best brokers look at each client’s history of loss. They identify past patterns of loss and potential trends for risk. For example, a series of similar injury claims may require a cost-saving ergonomic solution. With the solution in place, the broker advocates to the underwriter that the problem has been addressed. The result: better rates based on better risk management.
Score 0 if your broker has never studied your history of losses or knows your history of loss, but has done nothing about it. Circle 1 if your broker has helped you improve an area of chronic loss. Your broker earns a 2 if he or she has eliminated the risk and advocated better rates on your behalf because your loss history is a thing of the past.
Performance Category III: Policy Review
Getting to where you want to be requires knowing where you are. Dependable brokers make recommendations only after thorough reviews of policies currently in place. The best brokers identify coverage gaps — and overlaps — as part of their due diligence.
This is basic business sense — the least you should expect from a broker. Some competitive firms offer complimentary reviews, which cost them time, but often gain them new business by demonstrating areas of risk and waste. You should also ask yourself if your broker has discussed other program and plan design options, such as loss-sensitive solutions or captive alternatives.
Give your broker an enormous 0 if he or she has failed to review your current policy. Score 1 if the review has been made, but the result is status quo. Your risk management team earns a 2 if the review results in better coverage, elimination of duplication, and innovative solutions.
Performance Category IV: Contract Changes
Brokers tread lightly in this area. Some consider it a minefield — a place they prefer to let the lawyers play. Braver brokers realize that risk multiplies where there are multiple relationships. Since contracts and leases define relationships — obligations and liabilities — they are documents that should be free of doubt and disagreement in matters of risk management.
Knowledgeable insurance brokers, trained in the art and science of contract and lease language, review such documents on behalf of their clients. They check the indemnification and insurance clauses and make clear to their clients the liabilities they are assuming. The best brokers show their clients ways to reduce or transfer these liabilities.
Your risk management team scores 0 if they do not know how to review contracts and leases and fail to recommend the counsel of your attorney — worse, if they review them, but are unqualified to do so. Give your broker a 1 if he or she reviews such documents but has little to offer. Your broker gets a 2 for providing diligent, intelligent insurance-perspective review of your legal documents before you sign them, for making recommendations that reduce or transfer your risk, and for advising you to consult with your attorney on other specific issues in the document.
Performance Category V: Safety Recommendations
Safety is no accident. Cliché that it is, if practiced for its wisdom, those four little words could put a lot of people out of business. Ironically, lack of safety and too many accidents also put companies out of business. That’s where insurance brokers with loss prevention expertise become guardian angels.
Loss prevention experts not only identify problem areas and “accidents waiting to happen;” they know how to fix the cause of claims. Such brokers review — or create — companies’ safety manuals and enhance — or initiate — safety programs. They understand compliance issues and OSHA requirements, and they know the importance of employee participation. Safety is everyone’s business. The surprising thing is how many insurance brokers fail to act like it’s theirs.
Circle 0 if your risk management team ignores safety issues and offers no advice in this area. Give your broker a 1 if he or she makes an occasional suggestion after an accident claim. Your broker deserves a 2 — and more — if he or she becomes part of the solution by helping you put policies and practices in place that reduce risk, increase safety awareness, and make safety a core value of your company.
Risk Management Service Scorecard
Business Comprehension 0 1 2
Loss Analysis 0 1 2
Policy Review 0 1 2
Contract Changes 0 1 2
Safety Recommendations 0 1 2