After years of hard market conditions, there are signs of a thaw, with pricing beginning to level out, thanks to increases in capacity and competition in the casualty and liability market. According to a recent study, market conditions are showing signs of improvement in the second half of 2021 as new capacity comes into the market, though coverage negotiations continue to be challenging regarding pandemic exclusions and other hot-button issues, such as cannabis and wildfires.
Knowing this, buyers can help ensure they’re in a good spot when equilibrium hits by making sure their casualty brokers are thinking as creatively as possible to get them the best rate and terms & conditions. Here are five ways to tell if your broker is aligned with your risk management strategy.
Is Your Broker Reevaluating Your Risk Profile?
The COVID-19 pandemic changed most organizations’ risk profiles almost overnight. For some companies, these changes were in direct service of fighting the pandemic—retailers manufacturing masks and protective gear or distilleries pivoting to make hand sanitizer. These shifts raised new risk questions. Also, if a remote worker gets injured at home, for example, are they covered by workers’ compensation? Stellar brokers should be highly responsive and proactive in guiding their clients through these changes by explain the full range of options and industry standards that companies need to traverse. They should be able to be fairly precise about how much prices may increase, offer alternative risk financing strategies and be comfortable discussing optionality to ensure risk managers have choices.
Is Your Broker Moving Beyond Data to Insights?
Data is power—but only if you understand the insights it generates. A thorough broker will provide synthesized insights to help focus the conversation rather than asking clients to wade through a sea of data unaided. An optimal mix of leading and lagging metrics can not only offer a snapshot of performance, but also create an ongoing information feed that top brokers can use to help steer decisions in real time. Powerful quarterly data and analytics dashboards populated by key performance indicators, such as claim duration or percentage of claims in litigation, can create a fuller view of how metrics are trending and either reveal the need for course correction or validate the effectiveness of the current strategy. Furthermore, a robust insights dashboard can also be used as evidence in underwriting: rather than leaning entirely on loss history, underwriters can be exposed to signs, such as increasing market share, that indicate a company is improving its risk management program. That way, by the time renewals come up, your broker has six to nine months of insights to help guide you through the current state of the market and support a narrative for your company to seek better terms.
Is Your Broker Focusing on the Big Picture?
The current market has made deals more difficult and time-consuming to put together, which means some brokers may be overwhelmed with spending time on actual transactions and may not be as focused on risk strategy. But strategy is more important than ever now. A steady cadence of conversations informed by longitudinal data and a continually updated perspective on the state of the market can help avoid surprises, while also building a long-term relationship with a trusted broker. These regular strategy conversations can help ensure that key decision makers, such as the board, have an open line of communication with the company’s broker, and can gain even more value and insight out of the relationship—as opposed to meeting for the first time during a tricky renewal. Potential questions that a good broker should be able to help a risk manager answer include:
- Can we get a better result by addressing our risk, or is this just the market?
- Have you tapped into every available market to make sure we can’t find the capacity?
- What is the right limit to make sure we’re adequately protected if we do have a claim?
Is Your Broker Giving You Choices?
A big red flag that your broker isn’t aligned to your strategy is when the company offers only one path forward. Particularly at the time of renewal, some brokers may fall back on a previous decision-making pattern rather than cast around for a full set of alternatives that could also address a particular problem or set of needs. Even if the original option is still deemed a best-in-class solution, being open to other possibilities can help win more competitive terms. For example, one company was presented with an alternative risk strategy that would shift its business from one insurer to another. Faced with losing USD $4.2 million in premiums, the current insurer cut USD $600,000 out of the product price, which incentivized the company to stick with its original risk strategy. Without exploring the alternative risk option, the company wouldn’t have gotten the same result. To ensure you have choices, risk managers should be asking brokers whether they’re optimizing your loss-prevention programs to reduce overall risk, adjusting or bundling coverages to keep premiums stable, and using captive insurance to retain or transfer risks in a cost effective manner.
Is Your Broker Helping You Integrate Transactional and Strategic Decisions?
Unprepared brokers have tended to see dramatically more premium increases over the past year. They may have access to all sorts of resources, but if those resources aren’t coordinated and integrated across both transactional and strategic choices, their clients may renew their traditional program at the last minute and at a much higher cost, or with terms and conditions that are less than desirable. The preferred alternative is working with a broker team that includes both transactional and strategy considerations in the same conversations. This integration, supported by strong communication, can help ensure alignment across decisions and time horizons. A well-prepared broker serves as your advocate for negotiating policy terms and helps risk managers take control of their risk. Brokers that fail to match risk with a best-in-class solution can lead to ineffective deployment of capital, reduced risk resilience and an inadequate risk management program that threatens the organization and the risk manager.