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Investigations changing insurance buyers-brokers’ relationship: study


November 4, 2005   by Canadian Underwriter


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Commercial insurance buyers are changing brokers, and company risk managers are more actively participating in the placement process and verifying broker information in the wake of regulatory investigations facing the insurance industry, an Advisen Ltd. study has found.
In a survey of more than 500 corporations and governmental entities by Advisen, a provider of analytics, benchmarking and market information to the global commercial insurance industry, risk managers at a wide array of US and Canadian organizations seemed to have put concerns surrounding contingent commissions and other compensation issues behind them. But survey results suggest the investigations have changed how risk managers interface with brokers on the placement of insurance programs.
Almost half the buyers who participated in the survey said they had made some significant change in the relationship with their incumbent broker — including replacing the broker or re-assigning some portion of their program to a new broker — or are considering a material change in their current broker relationship over the next 18 months.
A large percentage of risk managers said their relationship with brokers was changing in more subtle ways. For example, nearly 40% of the responding risk managers are now independently verifying the information provided to them from their broker and are taking a more active role throughout the placement process. Additionally, about 60% of respondents felt that further standardization in the placement process would improve overall speed and efficiency of insurance transactions.
“The situation seems to be trust, but verify,” said David K. Bradford, editor-in-chief who co-authored the Advisen briefing on the survey results. “Risk managers overall feel they have tackled the compensation issue, but clearly regard the placement process as a work in progress and that will have an effect on their relationship with brokers and therefore the dynamics of the marketplace for some time.”


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