By CYRIL TUOHY, managing editor of Risk & Insurance®
For many an entrepreneur, the scenario is familiar, at least it was when the economy was growing briskly.
The business owner went to a local agent with whom the executive already bought his personal insurance policies. Perhaps the broker was a friend of the family, a college roommate, a referral from a respected competitor. The relationship ran deep. The agent knew the executive's needs, better yet, anticipated them perfectly.
And the agent was independent, not beholden to the dictates of public stock markets. The agent, eschewing the "churn" business, was able to focus on providing a real service, the kind of service that comes from knowing the needs of a client better even than the client him or herself.
Over the next decade, the risk executive's company grew adding four, five or six employees a year. The company pushed into new markets, and before long the firm blossomed to more than 100 employees, generating north of $150 million in revenue.
Insurance contracts were more complex, requiring long hours at renewal combing through the fine print of casualty contracts and workers' comp documents. Document binders ballooned to 50 pages.
The local agent was having trouble keeping up with the complexity of the coverage: errors and omissions, environmental liabilities, product recall liabilities, contingent business interruption coverage, catastrophe coverage. The time had come for the proprietor to think about jumping ship. One option was the big broker house.
There is another way, though. The local broker could enlist the help of another larger, independent broker with the scale and depth to serve the larger company. Like the local broker the executive used when he or she first started, this larger broker is also independent, unfettered by outside pressures.
This is the idea behind the independent broker networks, Assurex Global, for example, and the COBRA network in the United Kingdom. They offer a way to match the demand of growing companies with the supply of larger brokers who can offer more complex services, whether that means offering larger broker, one with more expertise, or one located abroad.
Networks offer a viable alternative to the big public broker houses. Are the networks always the answer? No. It all depends on the individual client, his or her specific needs, and his or her comfort level. What matters, though, is that the risk executive doesn't have to sever the relationship with his or her long-time broker, even as the executive's company flourishes.
(Read Senior Editor Dan Reynold's Counter, "Grow up and Move On," here.)
February 17, 2011
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