Q: What are the attributes that make for the best brokers?
A: The attributes necessary are beyond having a certain high level of integrity and being trustworthy. It's having a knowledge base and being sophisticated enough to be able to understand complicated risks and then how to creatively package something that protects the clients. You can talk about the placement process or the evaluation process, but at the end of the day, what is an insurance broker? An insurance broker is a client advocate.
Q: When certain pressures are put on brokers, is there a danger that they may not represent their clients as well as they could or should?
A: If you do your client in and you take other interests that are not in your client's best interest, you lose. You always lose. So the best brokers take their clients' interest to heart. I think that the climate that we're in right now ... of transparency and disclosure ... that's why our belief has always been that you tell the client whatever you need to tell that client so that your relationship is protected. It's insurance for your relationship.
Q: Are there certain attributes of brokers that make them a better match for a Fortune 500 client, and are there certain attributes of brokers that make them a better match for a small business?
A: I think the needs of a Fortune 500 can be starkly different than the needs of a middle-market client, for example. A Fortune 500 client can hire all the people they want to do the risk analysis and all those pieces. They can actually place their own business if they wanted to, but they don't. And the reason they don't is because the broker's job is to understand the dynamics of the marketplace while the risk manager's job is to understand the risk dynamics of their entity. So the combination of the two is a much different kind of relationship than if you're a middle-market client, you're a manufacturing plant down the street, and you've got 200 employees and don't have a risk manager and you're a CFO. That person needs a different kind of professional who provides different levels of service than the Fortune 500.
Q: Have you seen the role of the broker change in the past 20 years?
A: I think it has changed. There was a time in this industry when brokers spent more of their time just placing business, and I think the sophistication of business in general, the globalness of business, just the levels of change that have occurred in the business sector, have forced brokers to be smarter because they have to be.
Q: What changes are we talking about?
A: Business moving globally, the financial diversification, derivatives, hedge funds, venture capitalists, mergers and acquisitions, all of those pieces. You as the broker on the business have to be sensitive to those, and understand them and how it affects the risks that are involved. You're always having to be on top of your game when it comes to that level of sophistication. Who would have thought that some of the things we're now insuring that we would insure the way we do? Look at computer risks, look at data risks--25 years ago, we weren't worrying about that stuff because we were worried about paper files. So, it's changed a lot.
Q: What about the scandal that's hit the brokerage industry in the past year--will brokers come out the better for it?
A: I think the dialogue that's been opened, the discussions (in) this industry, are having a huge positive impact on the industry. At the core, it helps you refocus your business on what you're there to do. The industry will be stronger for it, the value of what we do will be stronger. Ultimately, this is not a discussion about compensation. It's a discussion about what I, as a broker, do for a client. I think this has also focused brokers more closely on what they do. They are differentiating themselves on levels of service and what that service means.
February 1, 2006
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