Why You Need a Risk Manager

Many mid-size organizations depend on just an insurance broker for their entire Risk Protection Program.  Today’s world is marked by increasing business complexity and insurance coverage restrictions.  Should we be surprised that execs still get blindsided by claims and lawsuits that aren’t covered by their insurance?

Typically, larger firms have in-house risk managers for broad, strategic risk management – like preventing losses, improving safety, and testing contingency plans for survival.  Smaller firms get the same benefits by hiring an independent risk manager.

Your broker unquestionably brings essential insurance-related services to the table.  The reality today is this is not enough: businesses cannot get complete protection from just one source.

Some “black holes” you can avoid –

  1. A contractor needed a liability coverage extension to get a new project.  The broker said this would be “hard,” require loads of additional documentation, and incur a substantial additional premium.  The risk manager was able to assist the broker to get the exact extension needed with two easy questions and the cost was only $150.
  2. A high-tech startup needed a Health insurance plan to recruit new employees. The broker said the client was too small, it would be expensive, and options would be limited. The risk manager was able to move the conversation to another level, get “translations” of jargon and simplify the options.  The outcome was a great and affordable plan and good service options.

Differences to consider between a risk manager and most brokers ~

  • Would you be more confident in a specialist who helps you identify your key business risks and how to prevent losses and lawsuits, or a broker who basically just sells insurance?
  • Would you be happier with a specialist who helps with strategic enhancements to your coverage to help you get more business and revenue, or a broker who helps buy insurance to handle your obvious risks?
  • Would you get more value from a specialist who helps you enhance your Risk Profile and implement prevention plans for better coverage at lower rates, or a broker whose risk management suggestions will usually be linked to additional insurance purchases?
  • Would you prefer a specialist who works only for you with fees agreed in advance and no conflicts of interest, or a broker who gets paid by commission on how much insurance you buy?

Don’t get trapped:  Having just one advisor in a key protection area like risk management makes you vulnerable to just one set of ideas or point of view.  In today’s litigious and claim-happy world, you need dedicated, objective professionals on your team.

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3 Comments

  1. John Schaefer June 14, 2012 at 3:11 pm - Reply

    As a full-time risk manager it is clear to me that we get better service from our broker simply because I am paying attention to the topic and know how to communicate with insurers and brokers in their language. Companies that can’t afford a full-time risk manager should -at a minimum – use a consultant to perform a review of the current program. Ongoing involvement also keeps a sharper, more productive focus throughout the year.

    I’m sure that if I go to a mechanic without knowing their language that the net cost of car repairs is much higher for me than for someone mechanically inclined. The same is true when companies access insurance markets and brokers without having internal knowledge of the topic.

  2. Charles T. Wilson June 13, 2012 at 10:13 am - Reply

    I agree, Bart – many clients tell me there’s a fine and often frustrating line between “Trust” and “Verify.” Many want to trust – it’s easier and nicer. But many don’t know how to verify – or aren’t convinced time spent would yield results. Thanks for your input.

  3. Bart June 13, 2012 at 9:46 am - Reply

    Charles;

    Interestingly enough this topic is analogous to other conversations I have been involved with via email, face to face and LinkedIn. The question is aren’t there certain industries where the end user is better served by hiring outright a consultant – either contract or in-house – that has (or shows) not ties to a particular brand or product. Their job would be to keep the consultants that the product provider furnishes honest- in your case insurance brokers.

    Fundamentally if you are using an advisor/consultant that is loyal to a brand then you have to know their primary job is to sell that product to make money – technically they are not paid to work for the client. I am not saying all of them or even any of them are bad – but we should remain vigilant that what they do and what they sell us ultimately takes care of our needs.

    Which is why you need an independent consultant. But you knew that.

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