OFFERING RISK MANAGEMENT SERVICES TO CLIENTS
Two successful agents focus on the benefits of providing risk management.
Bob Schmitt
FIMS, Inc.
Rockford, IL
The current business environment puts every business at risk every day. New laws are enacted, others are revised, courts change their interpretations, property values go up and down, new financial procedures and new technology alter all our familiar relationships, etc. New exposures keep coming along to increase the number and severity of the hazards that surround us. It takes a full-time person, and in some cases a full-time staff, to stay on top of these problems and the technologies that lead to solutions. Enter risk management.
Any agency that’s interested in enhancing its professional image to clients and offering them a value-added service would do well to consider adding a risk management department. This will benefit the customer by providing the expertise and potential dollar savings to the account.
What’s more, in an era of declining commissions due to soft-market pricing and general company cost-cutting measures, risk management — as a fee-based income source — can offer an excellent way to stabilize your agency’s income level.
Agents often believe that risk management services appeal only to very large accounts. In reality, the businesses that need risk management the most are those in which the person responsible for insurance wears a number of management hats. This person will usually be the first to admit that they’re not managing risks as much as buying policies and hoping not to forget anything along the way.
Evaluating coverage and obtaining the proper policies represents only a small part of risk management. A business also needs to understand the various risk transfer techniques, captives, retros, as well as self-insurance. Knowing the positive and negative aspects of each alternative is extremely important. So is understanding how loss experience enters into the evaluation process by affecting the pricing and availability of coverage.
The evaluation process needs to provide a continual monitoring of claims activity, including the reserving and payment procedures of the carriers involved. It’s also wise to check the accuracy of the information that the carrier supplies. Make your client aware of general accounting and audit practices that impact their insurance program and how these factors relate to one another.
Risk management requires that the client provide you with a total management commitment (making you a part of their long-range corporate plan for new products or business acquisitions, joint ventures, and so forth) so that they can study the insurance implications before making final decisions. You, and they, will also need to keep on top of continual changes in the regulatory codes and laws that govern their business and enhance the professional posture of your agency.
Larry Caspers
Insurance Planning, Inc.
Hays, KS
Our agency has provided risk management services for many years; but unlike many agents we include risk management as a value added service to our clients. Although it’s difficult to measure the effects of offering these services, there’s no doubt that doing so has played a key role in our growth and retention — and helped differentiate ourselves from insurance peddlers.
We have considered setting up a separate profit center and working on a fee basis with businesses that we don’t insure; however, due to exclusions in our Errors and Omissions contract and lack of manpower, we’ve concentrated on existing clients.
The objective of risk management is to conserve the physical assets of the business from Accidental Loss and Liability claims. The first step is to identify all the exposures a client faces. This can only be done by a physical inspection of the premises and a thorough investigation of the client’s business.
When clients and prospects are reluctant to give us their valuable time, we’ve always replied: “If you were taking an airplane ride, would you prefer the pilot check out the plane in advance or just hop in and take off?”
Agents need to examine the client’s coverage closely in order to build a better mousetrap. Duplicating the existing program makes price, rather than enhanced coverage, the primary factor for change. There’s no way that an agent can underwrite properly over the phone or based solely on information the client volunteers: They need to ask questions.
We strive to uncover uninsured exposures, and then offer the insured coverage for these exposures if it’s available. This has been a tremendous sales tool. We’ve written many accounts based on exposures that the existing agent failed to recognize. Once the account is on the books, we continuously update the coverages, because businesses change on a daily basis.
We employ an on-staff loss control specialist to assist our clients with setting up safety programs, analyze loss history, conduct safety meetings, etc. With all the recent regulations, people are confused and don’t know who to turn to. By providing information and assistance we’ve written several new accounts that were referred by satisfied customers. People talk, and if you help one person solve a problem and another person has the same problem, your name usually comes up in the conversation. What’s more, loss control leads to improved loss ratios.
A good risk management program doesn’t necessarily cost more; it’s often a re-allocation of dollars that the client is currently spending for insurance. In our agency, risk management boils down to giving professional advice based on product knowledge and a thorough understanding of the insured’s business.