Watch out big brokers. Recently released research results indicate risk managers at large corporations rate smaller brokerage firms better than their global counterparts in terms of their overall quality of client service.
Marsh, Aon and Willis all received average scores, according to the 714 risk managers at Fortune 2000 companies who were surveyed for the 2008 Greenwich Associates Broker Quality Index.
Greenwich consultant Bill Bruno said for the global brokers, "It's hard to get that stellar, off-the-map performance."
Receiving above-average scores from risk managers were smaller firms such as Arthur J. Gallagher & Co., Integro, Beecher Carlson, BB&T and Wortham. National firms that received average scores were Hilb Rogal & Hobbs, Lockton and Wells Fargo.
Greenwich Associates declined to identify the brokerage firms that received below-average marks.
The research looked not only at what risk managers stated was important to them, but it also determined what broker behaviors drove the risk managers' business decisions. These factors are referred to as "stated" and "derived" importance.
"Customer service, understanding business needs, pricing, product knowledge and prompt follow-up--those five are the ones that are both derived and stated as most important," said consultant David Fox. "Not only would the brokers say those are most important, but over time we could demonstrate that their behavior was most influenced by those factors compared to the 10 or so other things we evaluate."
One interesting finding from the research was what did not tickle the fancy of the risk managers. Consulting services was an area that failed to impress risk managers in both stated and derived importance.
Fox said there was a degree of skepticism with the concept of consulting services. Some risk managers identified brokers who were particularly good at consulting and thought leadership, but many others believed it was more of a sales tool.
"Risk managers are looking for creative ways to get placement, get good value and good fees," said Bruno. "But they don't value when brokers come to them and say, 'Oh, we have a brand new service where we'll give you consulting advice on how to manage your risk management program and reduce your overall loss exposure.' Things like that. What makes this revealing is that oftentimes you see certain brokers in the industry are trying to push that heavily to their client base."
Transparency was a theme that continued to affect Greenwich Associates' annual research into broker quality findings. The industry investigations of a few years ago got the ball rolling, and now risk management programs, brokers and carriers are being put under the microscope of corporate audit committees and boards of directors. Risk management is becoming a more high-profile function by the minute.
"There's considerably more board attention on who are the brokers and carriers we use, why do we use them, and how do we test them and feel good about that," said Fox. "That's good because it elevates the role and perspective of the risk manager as somebody that increasingly the boards are interested in. And the risk manager increasingly is looking for proof that is visible in the public domain that they have chosen the right carrier and the right broker."
Of course, this increased visibility doesn't always work out in the broker's favor. It's a risk or an opportunity, depending on your outlook. Companies are becoming more inclined to switch brokers and carriers if they feel they aren't getting what they pay for. With that, brokerage firms--especially the large global ones receiving so-so reviews from risk managers--are losing their talent to other, usually smaller, firms.
Fox was quick to point out that, even though about half of risk managers said they would consider leaving their brokerage firm if their account representative jumped ship, that valued broker might not perform as well at a smaller firm. Risk managers know that as a broker gets his or her feet wet their company could be facing a great deal of exposure.
Greenwich Associates also asked the risk managers about their relationships with their carriers. Bruno said those surveyed felt their experiences with insurance companies' claims management processes, along with underwriting expertise and understanding of client needs, were the major drivers of satisfaction--all three being more important than price. Fox said most risk managers look to their brokers to secure the best price and judge their carrier on how they perform when a claim is filed. FM Global received high marks with respect to claims management and Chubb and Travelers also received above-average ratings.
Greenwich Associates planned to release its Broker Quality Index for middle-market companies this summer.
June 1, 2008
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