In today’s evolving marketplace, many best practice firms are leveraging their vendor partners for extra services, driving extra value to their organization. The insurance brokerage relationship is one of the primary areas these firms are mining in order to drive down their unit costs and gain a competitive advantage.
Listed below are a few examples of the services these companies are leveraging through their insurance brokerage relationship.
Three services you should look to take off your plate next time you’re in the market for a new insurance broker.
1. Loss Control :
This is where it all starts. Think of your cost structure as a boat and your claims and losses as water. The less water your boat takes on, the faster and longer it can travel. If your crew is too distracted bailing water it takes away from your mission. Further, if your company is taking on water faster than it can possibly bail most would agree you have a serious problem. We consider loss control and safety a critical component in managing your risk and your cost structure. High growth, high profit companies do this well. Struggling companies do this poorly. Most oscillate between the two year in and year out as they don’t have a true system in place. A solid loss control program is the key to controlling the high cost of employee injuries, motor vehicle accidents, liability claims, and lawsuits.
A good insurance broker understands the challenge for most mid-sized companies. They (brokers) have built in capabilities to assist your efforts in achieving your organization’s goals. Best practice companies look for these services to help them drive more ROI from their own safety and loss control programs as they understand these departments are not costs but rather investments if structured properly.
Your insurance broker partner should have the following loss control capabilities :
- Benchmarking : This is very important if your want to develop compensation plans that are consistent with your company’s goals. Many companies don’t do this well which leads to a disconnect between effort and results as the compensation plans actually run counter to what they want to achieve.
- Supervisor Training : Training on how to handle employee injuries, accident investigations, and employee safety communications.
- Site Safety Audits : It’s not a system until you close the loop and build in accountability. Your internal safety people need to be audited consistently, measured and evaluated to keep them on their game. Too many organizations think because they have the position filled they will get results. Like any job there are folks who perform well and folks who should not be in the organization. Combined with the proper benchmarks, site safety audits can be helpful. But don’t confuse or substitute loss control services provided by an insurance company or broker with your own program. That would be a costly mistake.
- Incident / Claims Trend Analysis : If you look at your Safety / Loss Control Department as an investment (which is the correct perspective), then knowing where to allocate resources in an organization to yield a positive result is critical. A good broker will perform 3 different claims trend analyses to uncover the “hot spots” in an organization ; usually employee injury incidents / g.l. claims / property losses. The claims trend analysis should then be shared and discussed with the company’s management team and loss control department to decide on the priorities and how to fund those priorities. This all emanates for the Claims Trend Analysis.
- Training Coordination – Typically your loss control department won’t have on staff an expert for all of the differing loss control techniques and exposures. The incident trend analysis will reveal certain “hot spots” an organization suffers from. Quite often a good broker will help perform the trend analysis for you, uncover the hot spots, and then look to pull in an expert to train your staff on how to mitigate future losses.
Metropolitan Risk Provides : Comp Care & Our Profit Tools
2. Claims Management :
“Best Practice” organizations understand the key difference between “Claims Reporting” and “Claims Management.” Claims reporting is simply a paperwork serve volley where by you the customer puts the insurance broker on notice of a potential event, who then notifies the insurance carrier, who then receives a formal claim number which they report back- sometimes. If you are really lucky maybe you get a conference call once per year where you go over claims or you get loss run reports sent to you once per quarter.
Claims Management is a function that is done in-house at Fortune 100 firms whereby they have experienced staff that are pressuring liability and workers comp adjusters to factually substantiate their reserving practices, and to close out files and claims fast as they know the impact these claims have on their renewal. This is a practice that is continuous 52 weeks a year and not simply done at “renewal time” as it’s too late by then.
It is the Policyholder that is proactive on ALL insurance carrier files that sees the most solid results. We recently had a case where one of our clients had 10 claims where the State Fund had no idea they could recover funds paid out on their injured workers from third party drivers who rear ended their vehicles. Our Metropolitan Risk Claims Advocates researched the workers comp law, showed the Fund they can collect first dollar on these claims and had 10 subrogation files opened. Within a year we were able to recover $300,000 in claims payments, which dropped our client’s experience mod by 18%.
In order to drive down your claims experience Best Practice firms demand active, measurable claims management from their insurance broker partners as they realize this is a critical component in driving down their claims results which in turn drives down both your direct cost (insurance premium) and indirect costs (overtime, re-training, employee retention, productivity, and internal claims admin.) Claims reporting is simply that – a reporting function. Claims management is proactive research and analysis, auditing, and accountability on each and every claim.
When done consistently the organization enjoys much lower claims values than their competition which drives down their insurance costs. Further they always know where they stand and are continually learning and getting stronger as the claims and incidents become top of mind leading to incremental improvements in their protocols.
Metropolitan Risk Provides : Deep Claims
3. Risk Transfer Verification :
We often espouse to clients that spending time and resources deploying risk management techniques are the most efficient way to reduce your overall risk financing cost structure. If done well it’s far less expensive to do the upfront work by designing strong contracts AND ENFORCING those contracts to transfer the losses to someone else’s insurance. Conversely if you don’t perform that diligence upfront you ultimately fund the losses through your own insurance at a much higher cost.
Risk Transfer techniques are one of our favorite mechanisms to finance risk because by having good systems in place you can fund losses and claims with other companies’ insurance. You simply need to know how to do it; or partner with a Broker / Risk Advisor that does. If you can’t secure this service from your broker we would advocate pulling in a third party that already has systems and staffing in place. It’s usually more cost effective to share the platform than build one on your own, staff it, and manage it at your cost. Best practice companies understand how powerful this risk management component can be as over the years it allows them to have a substantially reduced cost structure giving them a competitive edge.
In choosing a vendor that performs this service understand the service that you are getting. Avoid firms that just review Certificates of Insurance rather than policies. That is a worthless endeavor as Certificates are not worth the paper they are printed on. Secondly, once the deficiency has been identified, who negotiates with the sub contractor’s or vendor ‘s insurance broker to get them into compliance? If it’s you and your staff the system won’t work as it will break down. The brokers will double talk your staff, seizing the system as they will not procure the correct insurance, leaving your company to retain the risk and fund the claims instead of transferring it to your sub or vendor. If you retain the risk you will retain the cost of the claim.
If your broker promises to handle this function ask to tour their system. If they just use spreadsheets, or worse email, be prepared for failure. Further ask if the work is done by a dedicated staff person or if it is performed by an account or customer service rep. While capable they wear too many hats and have too many demands on their time to properly and consistently execute which will result in the high cost of failure. We offer this advice as we see many brokers that “say” they offer the service, however they don’t have the systems and staffing in place to deliver the service consistently which will leave you exposed.
When is comes to Risk Transfer Verification doing nothing is the most expensive option which is usually the difference between success and failure for many companies.
Metropolitan Risk Provides : Risk Rocket
In Summary :
These are just a small sampling of services you should look for. The key is to know these, and others, exist and to understand the powerful result they can yield if implemented and coordinated within the confines of a larger plan or strategy. We offer this piece as we find many mid sized firms are starved for these resources but don’t understand :
1) They are available
2) How to yield them, to what effect and why
3) How to find the right insurance broker partner to help them gain that competitive advantage (coming in a later article!)
In today’s white hot competitive marketplace the smart “Best Practice” organizations are leveraging these resources to lower their unit cost structure which allows them to gain higher profit margins or market share. To find out how you can leverage brokerage services to gain a competitive advantage please contact a Risk Advisor at 914-357-8444. If you’re a client and are interested in adding additional services please contact your specific Risk Advisor.
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