Caroline Muspratt looks at the role of the business consultant.
Donald Rumsfeld's "known unknowns" - the speech he made about the difference between what we know, what we don't know and what we don't know that we don't know - may not on first glance seem to have much to do with the insurance industry. However, this convoluted gobbledegook from the US Defense Secretary sums up quite nicely the role of business consultants.
For insurers, the need to use a business consultant can fall into one of three categories. First, to help with issues the company is aware of, but simply does not have time or the expertise to deal with.
Second, to look at a company's strategy or costs and point out where improvements can be made - usually things the company wasn't aware it could do. And third, consultants can come into a company and help pinpoint where future needs could arise, be it regulatory issues, accountancy changes or simply the great unknown.
Andrew Power, an insurance partner at Deloitte, lists some of the benefits of using a consultancy, explaining: "When it's a new issue the company hasn't faced before, the consultant has more expertise. Or they might have a one-off need such as a big merger, where it's not been worth their while building up expertise in-house, or they might need an independent assessment of some work or a review they have done."
Simon Gallagher, partner at chartered accountant Moore Stephens, agrees: "Consultants can be called on as sounding boards to give opinion on strategies or projects." He says they can provide an objective view of the potential risks, how sensible the rationale is, and tell the company things it may not want to hear.
Consultants vary from the big boys like Deloitte and Ernst & Young, which maintain an ongoing relationship with insurers, but point them in the direction of different individual advisers depending on the problem, to small boutiques with a great deal of expertise in one specific area.
Many companies try to have relationships with consultants at both ends of this spectrum, so they can find the right solution for their needs.
Consultants can cost a company between £500 and £2,000 a day, according to Andrew Bower, head of insurance at Capita Advisory Services, so businesses need to make sure they get their money's worth.
"When you're paying that much it tends to focus the companies and they effect change more quickly," he says. "Projects tend to get done on time and to budget, while a company that wasn't using a consultant might find its attention gets diverted to running the business and they let that project slip."
Most recently, changes in regulation and new guidelines have prompted companies to call in an adviser. "There's been a sea of change in the insurance industry," Deloitte's Power says.
"A consultant can help from understanding what the regulation is, to what this can mean for your business."
Gallagher adds: "Until recently there was low level change in the insurance industry and therefore there was limited demand for consultants. More recently there has been high level change which has increased demand."
Businesses in the UK have not gone quite as far perhaps as the US model, where calling in a consultant can be seen as a mark of success - that a company has the money to demand the services of a specialist adviser.
However, Steve Mathews, director of specialist consultancy EMB, says British companies accept that consultants have a valuable role to play, compared to other countries like Germany, where "there is a culture of wanting to do everything in house and not using consultants".
Saving money is not always the main reason an insurer will engage the services of a consultant. While they can often advise on trimming the fat from a business, many in the industry feel that saving money is best served by outsourcing. Consultants themselves insist that they want to "add value" to a company and help it perform better.
Mathews says: "There's a big role for consultants going forward, but they should be moving more towards this value-added area."
Capita's Bower says that industry consolidation has also driven a need for consultancy services. He explains: "In the past 15 years consolidation in the industry has been massive." As a result, he says, "companies are sat on big legacy issues and they've got hundreds of systems which are all product driven."
Some companies could however be reticent about using the services of a business consultant, particularly when it comes to human resources or management issues, rather than technical questions. Some businesses are concerned that once they call in the adviser, they will be persuaded to use their (often expensive) services year after year.
Other consultancies take a different approach. EMB's Mathews says: "Our underlying ethos is that we want clients to be empowered and do as much of the work as they are happy to do themselves." Rather than mean the company is doing itself out of clients, it has in fact "gone from strength to strength over the past 15 years", Mathews says.
"We're really able to add value as a consultant," he says. "We come in and help when they have reached the end of their capabilities and even when we have passed on the knowledge to the client, we do find some of the work coming back as in some cases clients feel they are better utilised doing other things."
Even so, the relationship between an insurer and a business consultant doesn't always run smoothly. Power says: "The key thing is to make sure that the expectations and scope are clear up front."
There are a number of ground rules which, if followed, can help smooth the relationship between insurer or broker and consultant. Gallagher sets them out as follows: "Project management is key both internally and from the consultants, projects must be properly managed from the outset through to delivery.
"There needs to be internal buy-in, relevant people should be involved and contribute when scoping takes place and be on side before the consultant begins. There must be clear measures of success and a vision of the changes required and the effect of those changes.
The consultant must be clearly briefed - often the brief is too loose or there are no clear expectations or criteria."
If insurers follow those guidelines, there shouldn't be any unknowns.