Being a great broker
Mr. Broker, you have chosen risk exposure as your playground, and you have the potential to cut it. The difference between a good broker and a great broker lies in the technical expertise. As a great broker you are well-versed in the technical side of the insurance industry, and you have a more comprehensive understanding and a broader view of the available products and cover than your fellow brokers. The following rules of risk assessment may further assist you in your game plan and lead to a more successful and rewarding result.
Identify the risk
When a construction team starts a new project, there are inherent risks associated with the processes of such a project. The risks can be identified by discussing the situation with your client including the direct material exposure as well as any consequential and long-term exposures. Once correctly identified, the risks can be planned for by implementing strategies to help minimise or suspend the risks.
Consider the various strategies to manage the risk
Avoid the risk
Some risks may be of a temporary nature which can be prevented by the conduct of the client or third party without large financial costs. The avoidance strategy accepts the assumed risk of a project and then takes the necessary steps to avoid it. For example, avoiding the risk of project time overrun by appointing a good project manager and experienced supervisors.
Remove/prevent the risk
Certain physical exposures can be removed or prevented, such as the impact of adverse weather conditions on construction. For example, the installation of drainage may prevent the influx of stormwater into work areas, or the assembly of certain modules in protected areas or off-site may prevent loss of production.
Mitigate the risk
Some risks will remain but can be mitigated, such as theft in construction. For example, by having a robust control environment in place, your client can mitigate the risk of incorrect quantities and quality of material being delivered on site. Another example is the marking and labeling of equipment to deter theft.
Transfer the risk
A viable strategy when identifying and evaluating risks is avoiding the consequences through transferring the risk to another party. Various tools are available to transfer the risk, of which insurance is the most common and often the most economical. Some risks can however not be transferred, and the client’s project management, or systems and procedures may have to cope with such risks.
Certain insurance policy requirements enforce the insured to apply preventative measurements such as an open trench limitation contained in a contract works policy. Consort Technical Underwriters will only apply regulations in accordance with the insured’s construction programme in order to minimise time delays and additional construction costs.
A valuable insight
The potential insured does not want to evaluate a multitude of insurance offers but wish to obtain advice best suited to mitigate his risk exposures.
Identify the correct insurance plan
As the broker you need to establish the correct insurance plan. Apart from taking the above risk strategies into consideration, attention should be paid to the critical components of the insurance plan, which should be explained to the client.
The benefits of the insurance
The benefit of insurance to business is the cover it provides against a particular risk or risks. Insurance is a contract in the form of a policy, in which an entity receives financial protection from an insurance company in the event of material losses or awards following negligence. Your technical understanding of your client’s business and of insurance benefits will stand you in good stead when recommending the transfer of a particular risk to an insurer.
The conditions and exclusions
Probably the most contentious and the most critical for your client to understand are the conditions (directly or indirectly) and exclusions which may result in a claim not being paid. This requires a thorough understanding of all the aspects of your client’s business as well as the cover of the insurance offers.
The deductible
The deductible or excess is an amount that the client pays when he makes an insurance claim. The excess is usually deducted from a monetary settlement or payable to the supplier or repairer in the event of replacement or repairs. Therefore, you need to make sure that your client is aware of the extent of the deductilble. Deductibles are there to discourage clients from often submitting small and insignificant claims. Policies with very high deductibles are typically less expensive, reason being that the higher the deductible sum the fewer insignificant claims.
The cost – premium
The policy’s premium is its price, expressed as a once off, an annual or a monthly cost. It is determined by the risk assessment done by the broker in consultation with the underwriter. For example, if your client has a history of business interruption (BI) due to machinery breakdown, your client will likely pay more for a BI policy or will have a longer time deductible than someone with less recorded interruptions. However, insurers my charge different premiums for similar policies. As the broker it is your duty to best advise your client taking into consideration his full set of circumstances.
Present your proposal to the client and conclude the business
The tone of your proposal should be professional and positive:
- Always have a title page
- Draw up a table of content to ease navigation
- Explain the reason why for your proposal with an executive summary
- State the problem / need / risk
- Propose a solution / insurance product
- Include benefits – exclusions – deductible – premium
- Share your qualifications and experience
- Clarify your terms and conditions
Technical insurance expertise differentiates great brokers. Put a high premium on doing things the right way. Always strive towards excellence in insurance.
You have your own style of selling a product and talking to your clients. Guard your reputation and always be prepared. Truly understand the risk you are dealing with. Often you will only get one stab at it.
Go the extra mile and stand out from the crowd. It is your responsibility and your responsibility alone to reach the next level. Be confident in your ability to sell and cut the deal. Remember that you are not only selling a product, but that you are also selling your service, and your name as a broker.
Make it your goal to demystify insurance. Your clients will love you for it.