Risk managers are not lackeys for brokers, says Andrew Cornish
' In his excellent book, My Trade, the BBC political editor Andrew Marr complains that too many newspaper columnists pontificate without first finding out what is really going on.
I thought of this comment when reading Anthony Hilton's observations about risk managers (Comment, 6 January).
The gist of his article goes like this: companies generally recruit their risk managers from the brokers who procure their insurance. This already close relationship is then cemented by hospitality and overseas travel. As a result, he says, risk managers are cosy with their brokers and do not complain about poor service.
As with most caricatures, it contains a kernel of truth, but it is a caricature nonetheless. A bit like saying "All politicians are habitual liars," or "Journalists tend to be alcoholics."
Risk managers come in all shapes and, like any profession, a minority are not terribly good at their jobs. As a group, though, I would say we are restless people, constantly looking for ways to better manage risk and reduce insurance spend. So, incidentally, are our employers. An Airmic survey last June found that one in five risk managers had changed their main brokers in the previous year and one in four their lead insurers. Hardly very cosy.
Risk managers come from many walks of life. Contrary to what Anthony thinks, only a minority have ever worked as brokers. Of the 16 elected members of the Airmic Council, for example, just three fall into this category (including myself, although I worked as a risk management consultant not in mainstream insurance broking). None of these three, moreover, uses their former employer as their main intermediary.
The same survey - plus another we conducted more recently - reflects a growing trend towards risk retention, which is often cited as a measure of sophistication and certainly reflects an impatience with the status quo. Our research shows that many of the best-paid risk managers are under 40 and that this new wave is taking a broader view of risk and a less insurance-focused view of their jobs. Indeed, a significant number have little or no involvement in insurance procurement.
At an association level, Airmic took a lead more than six years ago in vociferously demanding better, more transparent service from brokers. The fact that our then chairman, Richard Reddaway, is an ex-broker did not prevent him from being an outspoken critic of some of their practices.
Unfortunately, although we made some progress, it was limited in nature.
The FSA's welcome increased engagement in the question of broker remuneration provides us all with the opportunity for a fundamental change in the business model. This is something that Airmic publicly advocated two months ago, and it was good to read that Anthony Hilton agrees with us.
If we are to succeed - and I believe we will - brokers, underwriters, risk managers and the FSA must demonstrate a genuine desire for progress. Together we are the market, and we are all part of the solution.
' Andrew Cornish is chairman of Airmic, the association that represents UK risk managers.
