Best practices for using an insurance broker - by Spencer Macalaster

Managing insurance broker relationships effectively is paramount to ensuring a successful and sustainable insurance risk management strategy. Historically, a risk manager may utilize the request for proposal (RFP) or some other competition to allow for the best choice when evaluation the broker options. With the ever-increasing number of insurance broker consolidations, broker staff changes, carrier risk management requirements, and ever-increasing demand to reduce costs, a fresh approach to insurance broker management may be beneficial. 

As intermediaries between customers and insurance companies, brokers play a crucial role in guiding clients to the best policies that meet their needs. Brokers’ performance directly impacts insurance contract performance, stakeholder satisfaction with insurance, and, most importantly, your risk management strategy.

Insurance can be complex, with a wide variety of policies, providers, and fine print that can easily overwhelm even the most informed consumer. When seeking the best most cost-effective coverage for your business, working with an insurance broker can simplify the process and help you make informed decisions. However, to truly benefit from the expertise of a broker, it’s essential to approach the relationship strategically.

Here are some best practices to follow when working with an insurance broker:

Unlike insurance “agents” who typically represent a single insurer, brokers act independently and work on your behalf. Their role is to assess your needs, research options across multiple carriers, and recommend policies that offer the best coverage and value.

Not all brokers are created equal. Choose a broker who:

• Specializes in your business.

• Has a solid reputation and client references.

• Demonstrates clear communication and responsiveness.

• Brokers can only find the best policy if they understand your specific circumstances. Be transparent about:

• Your exposure.

• Any existing policies.

• Your risk tolerance.

• Providing complete and honest information helps the broker tailor coverage that fits you best.

Don’t hesitate to ask your broker to explain:

• Coverage details and exclusions.

• Policy limits and deductibles.

• How premiums are calculated.

• Claims processes and timelines.

• Loss prevention and safety training.

A good broker should translate insurance jargon into plain language and ensure you’re comfortable with the policy you’re purchasing. Leverage commercial insurance technology to streamline administrative tasks and enhance broker productivity. Implement Risk Management Information Systems (RMIS) to manage claim interactions and track policy renewals. Evaluate innovative risk management software that can convert traditional static insurance documents into interactive dashboards and visualization tools. 

Design a fee compensation structure that rewards highly performing brokers. Though brokers are traditionally compensated by commissions, performance-based bonuses and recognition programs should be considered to motivate brokers to achieve their targets. Ensure that the incentive plans are fair and transparent.

Conclusion
An insurance broker can be a valuable ally in navigating the world of insurance. Use these best practices to build a relationship with your broker that’s based on trust, transparency, and long-term value. By selecting the right broker, communicating clearly, asking questions, and staying engaged, you can ensure that your coverage truly matches your needs – both today and in the future. Promote a culture of teamwork and collaboration with your brokers. Insist that brokers share best practices and foster open communication channels. Regular team meetings and brainstorming sessions can help all parties learn and stay ahead of any issues that may arise. Effective management of insurance broker relationships is crucial for risk management success. By setting clear expectations, providing continuous training, fostering collaboration, leveraging technology, and incentivizing performance, insurance buyers can ensure that their brokers deliver best in class service to clients.

Spencer Macalaster is the executive vice president at Risk Strategies Co., Boston, Mass.