Earlier this year Post Magazine carried out in-depth interviews with a range of Airmic members to assess their views of the insurance market. In the first of two reports, their researcher Michèle Bacchus considers relationships with brokers and insurers, and also the Insurance Act.
Broker trouble, ineffectual communication with insurers and impending legislations are just some of the issues currently worrying risk managers, according to research carried out by Post magazine, with the support of Airmic, last April. These concerns weigh heavily on a risk manager’s daily life and insurers will surely benefit from showing an open appreciation.
A recurring request among the 15 risk managers interviewed is for “more communication with brokers” as brokers are repeatedly painted in an obstructive rather than enabling light, yet conversely risk managers’ relationships with insurers are “pretty much controlled via our insurance broker - we do want a bit more communication directly with our insurers as well”.
Brokers are adding value for over 70% of the risk managers; however, excessive emphasis on product placement remains a real concern: “We just want brokers to move away from that constant ‘trying to sell us insurance’ into being a risk partner and helping us reduce our risk.” Risk managers yearn for a bespoke service and expect to be delighted by extras, for which they will pay the fair price; 87% of respondents use a fee-based remuneration system topped up by additional layers and 20% also set key performance indicators.
Over 60% of respondents are confident their insurers respond favourably to evidence of good risk management, but paramount to this is a high level of communication. Where “deeper and closer relationships” do exist, both parties benefit as one risk manager explained: “They know more about us, we know more about them and we’re actually able to have a much more structured and rewarding conversation with them.”
This appears to be more a target than a common reality. “Historically, the attitude has been you’ve [only] got to tell them everything that’s negative so they know what to charge,” admitted a respondent. “It’s quite a difficult mindset to change.” It certainly must be, especially when proving the positive side - effective mitigation - still relies heavily on the insurers making site inspections. “I do require interaction from them,” bemoaned one participant. “I need them on site: I need them to be consulting with me, which they’re not doing. They are dealing with the claims, but they’re not consulting with me.
Stick or switch
Risk managers would overwhelmingly prefer retaining their existing insurers when faced with the option of cheaper premiums by competitors, except when it comes to claims. “It’s about making sure that our products that we’re purchasing are keeping up with cyber and give us the widest coverage that claims are being paid, low-level claims, because if the insurer’s not paying low-level claims what’s going to happen if we do put in a big one,” said one risk manager.
Claims is the leading factor to prompt browsing through the list of competitors especially when insurers play their joker card. “Generally speaking, the three main things [for sticking with an insurer] are fairly obvious. First is service, second is price, in terms of the premium, and third - and most importantly - is the claims situation. If their first reaction to a claim is a reservation of rights, I would be pretty intent on getting rid of them fairly soon afterwards if I could.”
The small print
Every research participant praised The Insurance Act for bringing risk management “up-to-date and into the modern age” and helping to express “the level of professionalism" or at least “identify that to the insurers”. Providing more peace of mind around claims and duty of disclosure, the Act will also bring senior management into the accountability process, a particularly welcome move, as one risk manager described: “Having these extra checks now means that when it all goes wrong, I can say ‘it’s not me anymore…you signed it’. So it will protect people.”
Charged with protecting their company, addressing changing legislation and strengthening relationships with both brokers and insurers, risk managers have a daunting task but their objective remains constant: improve direct communication with insurers and increase their insurers’ understanding of the company’s exposures and corresponding mitigations in place.
If brokers and insurers for that matter lack vital knowledge about a company’s risk map, they simply cannot offer the right services. “It comes down to not fully understanding how the business ticks and what is meaningful, so they almost go back to their comfort blanket of traditional insurance, instead of thinking outside of that.”
Better understanding could lead to a more targeted cover resulting in less confusion, fewer claims and greater satisfaction from all parties concerned.
Michèle Bacchus is Special Projects and Research Editor at Post Magazine. This article summarises the first two of four in-depth reports published earlier this year looking at Airmic members’ perception of the insurance market.