How to Choose Your Insurance Broker
Monica Minkel, RPLU, MLIS
All businesses need insurance. While there are a few insurance companies in certain areas or industries that are ‘direct writers’, – which means the carrier works directly with the Insured – most businesses use a broker or an intermediary to get to the various insurance carriers. The need for a broker creates the challenge of choosing the right broker and knowing how to evaluate your representation.
The insurance broker has two very important responsibilities. The first responsibility is knowing your company and your exposures. The second responsibility is knowing the marketplace and the carriers. Without knowing your needs, the broker will not be able to advocate for you and if they don’t know the marketplace, then they will struggle to find the right carrier or products to meet your needs. When you can overcome the very initial basics of knowing your company and knowing the market, how do you then sort out the good from the bad? Anyone can sell you a policy. How can you make a good decision on the right partner?
Below you will find a very simple matrix built on the following concepts. It seems to me that there are five key areas that I use in making my own decisions when evaluating a business vendor. I see customers using these same criteria as they make their own business vendor decisions.
1. Likability – we all want to work with people we enjoy. We will spend more time and provide more information if we have a good personal relationship. The likability factor is an important one because your team will be forced to interact with the broker’s team. It’s best if these people enjoy the experience. You need to know your team and they need to know you.
2. Competence/expertise – the team needs to have the basic competence to do the work and the requisite expertise in the areas that matter to you. If they’re not competent, then likability won’t be enough. Competence and expertise does not always mean having a huge book of similar clients (although that may help), but a strong understanding of the issues and some experience accomplishing your goals and objectives will go a long way.
3. Accessibility – you need access to the right people at the right time to be able to deal with day to day issues and also challenges or changes as they may arise. It’s great if they are competent and likable but if they don’t return your phone call, you probably won’t be happy. Look carefully at how many people are on the team and where they are located (geographically and strategically within the company). They need to be accessible to you but also to each other.
4. Approach to Risk – is the broker transactional or consultative? Are you being offered solutions to problems or products for sale. Does the broker’s approach to your risk management challenges align with your own? Products may change and people could shift, so it is important that the strategies of the companies be aligned. Growth and other changes to your company may impact your needs. Is the approach to risk one that will work for you now and in the future?
5. Process – consider the process for how a renewal is handled to how new products are developed and implemented. Any broker can provide a policy to you this year. Is there a process to make sure that your policy keeps up with your exposure? How are new exposures addressed and covered? The renewal process should be about discovery and updates not just renewing what you have. Is there a process for the day to day like issuing certificates and checking policies? The little things matter as much as the big ones. Don’t be afraid to ask questions about the minutia.
The reality is that there are many, many competent and capable brokers. In most cases, it is likely that any one of the brokers you may be considering could adequately place insurance for you. You deserve to work with a team you like. Companies change over time so any broker you engage should have a process to identify and address the changing needs of your company. In addition, any broker you engage should be able to update you and your coverage to keep up with changes in the marketplace (coverage and carriers). And it never hurts to have a team that is passionate or at least fiercely knowledgeable about your specific industry.
Here is a simple rating tool to help you with the process. Simply rate the brokers you interview from 1 to 4 (with 4 being the best and 1 being the worst) and add up the total. The broker with the highest number wins.
Need more help? Contact us at www.emergingrisks.net for additional support and analysis of your insurance needs.
Monica M. Minkel, RPLU, MLIS is Senior Vice President and Regional Director – MPS, for USI Insurance Services. Based in Denver, Colorado, Monica and her team provide service and support to clients primarily in the western United States. Her practice is focused exclusively on Directors & Officers Liability, Professional Liability, Cyber Liability and related products. She currently serves as Chair of the Southwest Chapter for the Professional Liability Underwriting Society, the premier leadership organization for Professional Liability insurance professionals.
Monica M. Minkel, RPLU, MLIS, cyRM has been working exclusively with Directors & Officers Liability, Professional Liability, Cyber Liability and related products for more than 15 years. She started her interest in finance by loaning money to her mom at age 11 (complete with a loan agreement and competitive interest rate). She is passionate about all things in the financial industry and the way technology is changing the way capital markets function.