How To Select an Insurance Broker

As with any other professional adviser, it is vital that a company select an insurance broker with whom they feel comfortable in terms of capability, suitability, chemistry and cost. The absence of any one of these vital ingredients will not allow the friendship to grow.

A broker should be viewed as an extension of the company's department and you must allow sufficient time for the selection exercise to be properly conducted.

  1. Choosing the participants. The spread and nature of the company's business will be the determining factor in choosing a suitable insurance broker. If the company is in international business with overseas subsidiaries and assets, the management of the company should look for a broker with an international network of offices who can service their overseas subsidiaries locally. If the company is based locally, overseas servicing will not be a priority unless foreign expansion is contemplated in the short or medium term.

    It is by no means rare to find international businesses using one or more brokers to handle their local risks and a totally different broker or brokers to handle their overseas risk. The nature of the risk that a company is facing or exposed to might also turn the company towards brokers who can demonstrate knowledge and experience in a particular industry.

  2. Clarifying the broker's role. Before embarking on the selection of a broker, a review should be undertaken of the company's insurance program. The role the broker is expected to play must be clarified. The broker's responsibility will naturally include:
    • Placing cover
    • Documentation
    • Invoicing
    • Maintenance and reporting
    • Claim handling
  3. Inviting and selecting the broker or brokers. A selection committee should be formed to drive the selection process. In particular, the financial and operational areas of the business should be represented.

    In inviting broking firms for interview, a manageable number should be invited. An invitation letter should be sent to each contestant offering them the opportunity to participate and setting down in the letter information that the company will need. Such information may include:

    • The nature of the business
    • The insurances to be reviewed
    • Current insurance register
    • Time table which sets out the date by which the report must be submitted; the date in which it will be submitted to the committee; and the date of appointing the successful broker
  4. Involving the insurance market. Extreme care must be taken in allowing competing brokers loose in the insurance market to obtain premium quotes. It will be counter-productive if they are allowed enough room to hawk the company's portfolio in the market; it makes sense therefore to select only one finalist or two so that this finalist will go to the market.

    However, the time commitment should not be under-estimated. The target should be to achieve better cover, cover costs and enhanced service.

 

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Comments

Dec
16

Choosing a good broker is difficult and a guide like yours is helpful. Thanks.

By Mary Norton