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Selecting and Working with a Broker

April 17, 2012RMG 102

Philadelphia, PA

Presentation Outline• The Selection Process – Gordon Adams, Tri Marine Int.

– Identifying Broker Candidates– Selection Criteria– Invitations to Bid– Broker Compensation

• Working With a Broker – Todd Marumoto, Mattel, Inc.– Ethics– Administration– Claims– Loss Control

• Working With a Broker (more details) – Hal Larson, MuscatineFoods Corporation– Risk Financing Techniques and Alternatives– Setting Performance Expectations– Terminating a Broker Relationship– International Insurance Brokers

The Selection Process

Gordon AdamsChief Risk Officer

Tri Marine International

The Selection Process

• Why do you need a Broker?• How often should a Broker review be done?• How much time do you need?

As a Rule of Thumb – 6 Months

1. Data Collection 2. Bid Parameters and Determination 3. Participant Determinations 4. Bid Specifications 5. Review Process / Interviews 6. Broker Selection & Service Agreement Negotiation

Identifying Broker Candidates

• Referrals• Industry Associations• Reputation• Publications• Ongoing Working Relationships– Yours– Risk Management Network

Invitations To Bid• Reasons for Bidding• a. Operational Changes• b. Merger or Acquisition• c. Broker Service Issues• d. Assurance of Competitive Product & Pricing

• Bidding Typesa. Open Bid – (Governmental Agencies)

• b. Closed / Limited Bid• 1. Selected Participants• 2. Controlled Access to Information and Markets• 3. Confidentiality

Bid Specifications

• Conceptual• Full Quotation – With or Without Market

Assignments• Hybrid• Split Programs• Beauty Pageant• Conceptual / Risk Based

RFP Process• Information to Provide to Brokers:– May Choose to Exclude Premium Information– Policies– Programs• Insurers• Limits• Retentions / Letters of Credit• Exposures

– Engineering Reports– Loss Runs

Selection Criteria

• Industry Expertise• Size & Type of Organization• Technical Competence• Market Access• Financial Condition• Marketing Philosophy• Location

Making the Choice

• Matches– Knowledge– Personalities– Personnel– Philosophies– Reputation– Results

Broker Compensation

• Commissions• Fee Based• Combined Commission & Fee• Incentive / Bonus PlansNote: Under any broker compensation plan, services provided must be clearly

specified and detailedExamples: Insurance negotiations & placement, policy service, safety

inspections, loss control, claim support and risk management consultation

Working With A Broker

Todd MarumotoDirector

Mattel, Inc.

Ethics

• Code of Mutual Appropriate Conduct• Honesty • Integrity• Good Judgment• Full & Total Disclosure• Objectivity, Due Diligence, Professional Care• Privacy, Confidentiality

Ethics• Ethical and Courteous Behavior• Avoid Real or Perceived Conflicts of Interest• Be Forthright and Realistic• Know Your Opportunity Partner (Broker)• Written, Clear Expectations and Standards• Discuss Philosophy of Contingent

Commissions• Report and Correct Issues

Administration• Contract– Key Points

• Service Agreement– Key Points

• Communication– Elements of Good Communication

• Other Services– Actuarial Support– Captive Feasibility Studies– Contract Review & Support

Claims• Claims Services

– Adjusting– Audits – Analysis

• Team Approach– Communication and Trust– Partnership

• Issues to Consider When Evaluating Broker Claims Services– Industry Knowledge– Qualifications, Specialties and Level of Expertise– Familiarity with Carriers and TPAs– Availability

Loss Control• Purchasing Loss Control Services

– Determine Need, Criteria & Cost– Identify Candidates– Maximize Resources

• Loss Control Projects– Disaster Recovery– Business Continuity– Claims Analysis– Property and Casualty

• Issues to Consider when Evaluating Broker Loss Control Services– Industry Knowledge– Qualifications, Specialties and Levels of Expertise– Knowledge of Insurance Company Resources, Reputations

and Market Capabilities

Working With A Broker(More Details……)

Hal LarsonRisk Manager

Muscatine Foods Corporation

Types of Risk Financing

• Traditional Insurance– Installment Payments– Premium Financing

• Self Insurance• Risk Retention Programs• Purchasing Groups• Captives

Risk Financing TechniquesBroker Services

• Actuarial• Feasibility Studies• Implementation Plans• Program Management• Compare to Traditional or Self Insurance

* Involve your CFO

Captives Considerations

• Coverage(s)• Financial Goals• Legal Environment & Domicile• Taxation and Repatriation of Profits• Start up and Continuation Costs– Capitalization, Management, Accounting,

Auditing, Reinsurance, Legal, Fronting Fees, Claims Services, Loss Control

Setting Expectations

• Setting Expectations – Mutually Agreed– Term of Engagement– Compensation– Confidentiality Agreements– Conflict of Interest Agreement– Record and Data Retention and Ownership– Service Team Responsibilities and Timelines

Setting Expectations (cont.)

• Clear - Written Expectations• Periodic Performance Status• Adjustments and Corrections As Needed• Conduct a Contract Ending Assessment

Performance Expectations Details

• Identify Relationships• Review Performance Guidelines• Prioritize Expectations• Determine Performance Elements• Determine Performance Metrics• Reach Agreement• Document in Writing• Continually Evaluate Performance

Performance Measurements

• RIMS QIP (Quality Improvement Process)– Template Driven Guidelines• rims.org – Resources – Quality Program• Quality Partnership Builder (QPB) – Soon to be released

revision

• Broker Forms• Other Industry Forms• Company Specific*Word format samples in book & on CD

Terminating A Relationship

• Due Diligence– Failure to Resolve Conflicts & Dissatisfactions– Periodic Competitive Assessment of Services– Regulatory Requirements

• No Surprises• Direct Detailed and Timely Notice• Conduct an Exit Conference

Termination – Timing Considerations

• Broker Service Agreement• Policy Terms• Broker Remuneration– Minimum Commissions or Fees– Remaining Old and New Fees

• Other Services– Safety, Loss Control, Claims, RMIS, Professional,

etc.

Termination – Points of Caution

• New Brokers Access to Carrier(s)• Certificates of Insurance• Auto Insurance ID Cards• Special Services

* Buyer must conduct this termination in a professional and ethical manner to avoid emotional and non-professional behaviors.

International Broker Considerations

• Same as Your US Broker• Multiple by Country• Broker’s Offices and Size• Partnerships and Affiliations– Assurex Global, Globex International etc.

• Product Line or Industry Expertise• Accessibility and Communication• Local Banking Contacts and Relationships

International Broker Services

• Local Representation – Customs, Regulations• Domiciled Policy Requirements• Premium Payments• Accounting Services• Safety and Risk Engineering• Claims Services

Questions??• The Selection Process – Gordon Adams, Tri Marine Int.

– Identifying Broker Candidates– Selection Criteria– Invitations to Bid– Broker Compensation

• Working With a Broker – Todd Marumoto, Mattel, Inc.– Ethics– Administration– Claims– Loss Control

• Working With a Broker (more details) – Hal Larson, MuscatineFoods Corporation– Risk Financing Techniques and Alternatives– Setting Performance Expectations– Terminating a Broker Relationship– International Insurance Brokers

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Welcome to RIMS 2012 Annual Conference & Exhibition