Insurance Buyers Can Get Complacent
Posted by Andy Gregory on Wed, Dec 23, 2009 @ 10:00 AM
As a property & casualty insurance broker, I have sat across the desk from hundreds of insurance buyers. Often, I encounter a Risk Manager, CFO, or VP of Finance that understands the overall concept of risk management and the nuances that can make or break a company. Just as often, however, I encounter some that treat insurance like a toll booth that they simply toss some money into once a year and drive away. When competing brokers come in to meet with them, they give them copies of their policies, updated sales and payroll figures, and send them off to ferret out the best deals available in the insurance market. Often, this insurance-as-a-commodity exercise is done simply to "keep their current broker honest", and other times, whoever has the cheapest program wins. This complacency is an assumption that the coverage that they have in place is correct and adequate, which many times is simply not the case.
Risk management is a process that is riddled with subjectivity and interpretation. Risk exposures can be downright blatant and obvious, but can also be subtle and appear benign. When encountering a prospective client that takes the insurance-as-a-commodity approach, I explain that we conduct our own risk analysis and present options based on our findings. If the buyer is not amenable to that, I respectfully decline to offer our services. The last thing that I would want to do is inherit someone else's mistake and perpetuate an existing problem.
Planning a risk management and insurance program is a three way street between the buyer, the broker, and the insurer. I understand that cost is a huge factor, and I'm not saying that everyone should break the bank to buy insurance. My point is that insurance buyers need to continually monitor the risks that threaten their businesses and make sound decisions to address them. Summarily, this is what your insurance broker is for. If your broker isn't giving you a clear picture of what threatens your company, you have no idea what that pile of insurance policies will do for you. I am continually amazed at how much confidence people place on a stack of paper!