Top figures weigh up the pros and cons of going in-house, ahead of Ferma risk management forum
As Insurance Times reported last week, recession-hit firms are questioning the value of brokers, with many large companies eager to know if they can save much-needed cash by bringing some of their risk management services in-house.
That was the claim of insurance law firm O’Connors, which says it has encountered a big increase in the number of firms, including FTSE 250 companies, seeking advice on whether their businesses are already capable of playing the role of a broker and dealing direct with insurers.
Airmic said its members had not raised any new concerns about their brokers’ roles but it maintains that it could be more cost-effective for firms to bring some services in-house in some circumstances.
Biba defended brokers, particularly in the claims process, providing evidence that brokers can secure increased payouts for their clients.
So, are brokers worth their weight in gold? Here, representatives from the Federation of European Risk Management Associations (Ferma) add their voice to the debate ahead of the Ferma Risk Management Forum 2009, which will be held in Prague on 4-7 October.
Marie-Gemma Dequae, immediate past president of Ferma and risk manager of Belgian social sector specialist Partena, lists elements that make direct contact with insurers without a broker easier:
• The risk can be transferred 100% to one insurer; in liabilities, risks are transferred in a more layered way (one insurer per layer).
• The risk does not generate frequent claims, and more third parties are involved.
• The insurer has an extensive risk engineering unit.
• The risk can be managed in a global programme.
• The client has a good, centralised risk management unit and cost allocation system.
She also explains what makes direct links tough …
• Increased regulatory risk: compliance pushes insurers and clients to issue policies in more countries, calling for local and broker back-up.
• More complex claims.
• In some countries, there is a regulatory rule that insurance must be placed through brokers.
… and gives reasons other than cost for direct links:
• Uniform risk engineering policy with no third party.
• Direct data exchange between insurer and client.
• More speed in potential product liability issues.
Gérard Lancner, president of the French risk management association l’Amrae and director of risk management and insurance for Yves Rocher, says: “The first question is, what services do I really need from external providers and what value can they add versus doing the work internally, taking into account the various services needed to run properly an international insurance programme, such as:
• Preparation of the details of services and coverage required.
• Marketing the risks and finding the right insurer/reinsurer.
• Policy preparation.
• Engineering and loss prevention services.
• Central and local implementation and administrative work of international coverage.
• Claims management.
“Secondly, what am I prepared to pay for each itemised service or part of them, taking into account the ways to do so, such as commission and/or fees?
“Finally, the third question will be who can provide the best service for that price, keeping in mind that different parties may operate in specific fields, such as brokers, technical experts, lawyers and consultants.”
• At the forum, Gérard Lancner will moderate a l’Amrae workshop on broker remuneration (6 October); Marie-Gemma Dequae will moderate two workshops run by Belgian body Belrim, on mergers and acquisitions, and on supply chain risks.
• Insurance Times’s sister title, Strategic Risk, will produce daily newsletters at the Ferma conference. See www.strategicrisk.eu/ferma