Brocker Fears

I speak from experience: many times in my career, I wished I was a deck hand aboard a steamer headed for Cartagena, with my only problem being how to explain to my captain that I had missed a spot swabbing the deck owing to too much grog the night before. “What else could I do, sir? He allotted the stuff and I was just following orders.” Visions of palm fronds can and still do invade my mind at regular intervals.

But brokers’ fears arising from the business of insurance — whether they concern things that could go wrong, or have gone wrong — are all part of the work after all. Lessons are (or should have been) learned from those instances. In most cases, we do learn from experience. But aside from a concerted effort to take stock of what we do, taking the time to check and double-check our work, all of us are vulnerable. What are some of the things we fear as brokers, and how can these fears be controlled?

FEARS RELATED TO CLAIMS

Claims always cause brokers to ask themselves a number of unsettling questions. First and foremost, what broker doesn’t fear the occurrence of an accident, fire, crime or other loss or damage that will test the value of the insurance, the advice we gave and how we conducted ourselves?

A claim will quickly determine whether or not the policyholder’s insurance limits are adequate — “Who ultimately determined this?” brokers might ask themselves, “and was it done with co-insurance clauses in mind?” — and whether or not all of the perils associated with the claim are covered (including loss of profits, liability, equipment breakdown and so on).

Does the coverage, for example, reflect all we could have done given market availability? Where did we go for quotations? Did the client understand what was being purchased? Did we clarify any particular points? If the client was new to us, did he or she understand and agree to any differences in coverage or limits from what he or she had previously insured? Did the client sign back any acknowledged gaps or deficiencies?

For a liability claim, we might ask ourselves: Was the primary limit sufficient? Was excess liability or umbrella excess liability purchased to cover the possibility of a high product and completed operations claim?

Underlying the above questions is the broker’s fear of an errors and omissions lawsuit. Such lawsuits might result in returning uninsured dollar differences to the client, making up for what a tribunal decides as less than adequate protection.

POTENTIAL LOSS OF THE ACCOUNT

Another priority — and hence, a concern for the broker — is preservation of the account, which sometimes connotes an all-out effort to meet the competing broker’s lower premium. No one wants to lose business due to premium but, on the other hand, perhaps there are times when we need to let the account go?

Rather that approach account preservation from a premium standpoint, perhaps we should approach it from the point of view of account preservation by way of coverage. In other words, analyze carefully the client’s coverage and expand on it; add items that in most cases might be premium-free. To do this, you will have to have a deep and clear understanding of the perils and exposure to loss as they relate to the client’s business in order to have insurance properly executed.

If you are unclear about a particular product the client is handling, look it up and study it; in consultation with the client, get to know what the product consists of, and whether it might become a market problem. (This discussion would precede any premium consideration). Do this before the underwriter does: it will demonstrate that you have done your homework. A broad knowledge of the client’s product will allow for discussion without controversy; it will also give the underwriter every opportunity to rate premium as close as possible to anticipated loss.

If premium remains an issue, be forthright with the client. Tell the client you are concerned about the loss of the business due to a premium difference (avoiding the word ‘fearful’). By being forthright, you will let the client know that there are specific reasons why you may not be able to make up for a substantial difference in premium quoted by the competition. If nothing else, such honesty may lead you into the safety net of loyalty.

Sometimes, client loyalty may supercede attraction to another broker’s lower quote. When that happens, make sure you have demonstrated to the client that you have pursued other market quotations; that you are aware of differences in quotation coverages and that the insurer ultimately bearing the risk is tied to the particular class by extensive coverage forms, broad reinsurance facilities and an ability to respond to claims with experience and dispatch. By doing so, you are not camouflaging the fact another broker has a lower quotation; rather, you are substantiating the client’s outlay of dollars for coverage you have shown to be superior, albeit more expensive.

BINDING COVERAGE

Questions about binding coverage — is it bound or isn’t it? — go straight to the heart of a broker’s credibility.

For example, who in the business hasn’t gone through the following sort of agony?

It is 4 p.m. on Friday. A client calls and requires coverage to be bound. Fast forward to Monday morning, at 9:10 a.m. The same client calls: “I have to report a claim.”

Fortunately, you did everything you had to do on Friday to get the message through to the insurer. You either faxed or emailed the company, telling them to bind coverage. You probably called them beforehand, letting them know full documentation would be sent before the end of the day. No doubt, you had an officer of the brokerage initial your notes and transmissions. No fear here, then…

Or is there? How certain are we that the message got through? Can we rely on the phone call as a back-up for our actions? We might spend all weekend wondering if there could be a problem.

Just like a loss tests the adequacy of coverage for a client, binding coverage will test the relationship between the broker and the insurance company. The simple act of binding coverage, especially in exigencies, is partly a function of how we as brokers have presented ourselves over time to the insurance companies. This may not appear to have a direct connection with how brokers manage their fears, but it could prove to be an integral part of the overall system. Brokers may worry, for example, because of a fear of the unknown. To conquer our fears of the unknown during the binding coverage phase, it is important that, at the same time we are channeling our efforts to keep the client free of trouble, we are also taking the time long-term to keep ourselves free of trouble with our insurers. That, in turn, should keep us worrying less when we need to trust our insurers.

THE WORST FEAR OF ALL?

Perhaps one of the broker’s greatest worries is how to broach with the client the topic of premium payment. If you want to be professional about your work and considerate of the client’s feelings, you will not malinger on this important point. From the moment you begin a conversation with the client on quotation or renewal, premium payment will be at the forefront of the client’s mind and the client will be waiting for you to mention it. Waste no time in explaining the rules of the brokerage as to how premium is to be paid.

Remember, if you are dealing with a commercial client, there is probably a procedure already in place for settling the client’s terms of payment with customers — including a 2% interest charge for each month unpaid. So, what’s your worry? The client understands that in business you do not get something for nothing. You will be respected for a timely mentioning of premium payment and the terms that come with it. And — and this is a big “and” — once the subject is off your mind, you will be able to focus exclusively on the insurance product itself, as opposed to its cos
t.

BROKERS: EMBRACE YOUR FEARS

There is nothing wrong with a sense of fear. It keeps us alert and it makes us think twice about what we are doing at any particular time. Also, it encourages us to take steps to reduce or eradicate potential risks. But it should not overwhelm or replace a feeling that what we are doing will be the best for the client. If in doubt, ask. Ask a fellow worker, ask an underwriter, ask management; most importantly of all, ask yourself if you have done all that you can possibly do to uphold the professionalism demanded of the business. Don’t fear fear. Embrace it, get it to help you, get it to work for you, by causing you to work to the best of your abilities.