When it comes to the basics of what they look for in a broker, risk managers agree on the essentials. Among the bottom-line attributes they expect are:

• Transparency

• Responsiveness

• Depth of service

• Expertise

• Specialization

• Reputation

• Carrier connections

• Flexibility

• Knowledge sharing

• Policy terms and conditions

• Competitive pricing

“We seek technical knowledge, professionalism, relationships with key parties in the insurance marketplace, administrative capability (we issue thousands of insurance certificates and have admitted policies in 25 to 30 countries), and knowledge of us and our industry,” says Gary Pearce, vice president of risk management for workforce-solutions firm Kelly Services Inc. “Setting aside the things we should be able to take for granted, the core attribute we seek is to develop a trusted business partner relationship where the broker's external expertise acts as an extension of our in-house resources. We want the broker to collaborate with us in designing and executing creative solutions.”

Today's risk managers are more sophisticated and demanding, which raises the bar for broker professionalism, says Jeff Colburn, managing director of Marsh Risk Consulting. After the basics are met, however, there are a lot of variables in what individual risk managers look for in a broker—from the “day-to-day blocking and tackling” of issuing policies and insurance cards, to providing high-level expertise in a specific industry and how it relates to insurance and risk management.

“Specialization is important, either by industry or technical matter,” says Colburn, such as technical claim responses or crisis management and consulting opportunities. Claims management is another important piece of the pie.

The main reason a risk manager needs a broker is to navigate the complexities of the insurance world and to determine how all of the client's unique risk exposures fit together. “The whole reason we have a broker is to be knowledgeable about the insurance markets and to have a relationship with those carriers that write our coverages,” says Sarah Perry, risk manager for the city of Columbia, Mo. “I need them to be available, responsive and have good communication skills, and to understand all our risk as a whole. As a public entity we're a conglomerate of a lot of different things.”

One or more?

Perry stresses that this doesn't mean the broker must specialize in public entity risk, but rather should understand all areas of exposure. Columbia has a power generation plant, a small airport, a railroad, a health department and many other areas of exposure that public entity specialists may not understand. “We prefer a generalist,” says Perry, who maintains a relationship with a single broker to provide that service.

“I know other public entities have multiple brokers, but we have elected to just go with one,” she notes. The biggest advantage of this approach, she explains, is that it's simply easier to deal with a single broker: “Multiple brokers are often asked to bid, or assigned specific coverages; I just have one broker that helps coordinate all of it. One disadvantage is that you don't always get that different viewpoint that you'd get from another broker or consultant.”

Although Pearce at Kelly Services says he maintains “excellent relationships” with primary broker McGriff, Seibels & Williams and Aon, which brokers a portion of its program, “our preference is for one broker because we deem it more important to concentrate our purchasing power than to have an ongoing competitive dynamic. There are several outstanding firms that we don't now do business with but with whom we try to preserve relationships. When we evaluate any broker, we're equally interested in the overall organization and in the specific service team that would handle our business.”

Other risk managers need a tighter focus. For example, although NYU maintains the services of a single large broker for most of its risk, Liebowitz also relies on a specialist broker to handle the fine arts (“things that are in museums,” as he puts it) segment of the business. “Even though I have 98% of placement with one broker, the 2% they don't have is because as big as they are, they don't have the expertise I need to do a great job,” he says. “The broker I've chosen for that business is transparent and has significant expertise and contacts in that field.”

And a specialist broker is essential in risks involving public utilities. “As a utility company, experience in our industry is particularly important,” says Karl Zimmel, manager, risk management services for Tucson Electric Power. “From my previous jobs, I found industry expertise to be important in the transportation sector as well. However, it wasn't as important for a manufacturer or distribution company.”

Can we talk?

Regular communication between risk manager and broker is essential for a successful relationship—although the definition of “regular” can range from multiple times a day to once a year.

“I speak to my brokers once or twice a day on various different aspects of the placement,” Liebowitz says. “NYU is a fast-moving machine and as it churns through its day of business, exposures can change, sometimes for what we might not be covered for. I have a global empire, and it's managed by one broker. Things might be OK in New York, but not OK in Shanghai, or there's a question overnight from Abu Dhabi. The broker either provides documentation or information.”

Other risk managers expect direct communication only on an as-needed basis.

“We meet with our broker whenever business circumstances call for a meeting,” says Pearce of Kelly Services. “In practice this works out to roughly 10 meetings a year, even though our main broker is in another state. We hold planning meetings for major renewals, we visit all our underwriters in person annually, we conduct periodic reviews of key events, and we tend to have the occasional additional meeting for specific situations as they arise.”

To facilitate communication, some risk managers, such as Karl Zimmel, prefer contact for the day-to-day account manager/executive to be a former risk manager, “because they understand the daily needs and issues from my side of the desk,” he says.

Some meetings are mandated, of course, such as the quarterly meetings contractually required between Sarah Perry and her broker, although actual meetings vary. “If we're not renewing, we may talk once every couple of weeks, although there are times when we may talk daily. A good broker likes to be in touch, even if they're just sending information or noting that you had a loss. I value the relationship when I know they're taking an interest beyond renewal time.”

Because Perry recognizes communication is a two-way street, she makes an effort to send the broker information about changes in exposures and other shifts so she can get their input on risk. In these cases, “they don't just place coverage, but are consultants on how to best handle exposure issues,” she adds. “I want them to negotiate on my behalf, but also be involved enough that they have an understanding of what our risks are.”

Rather fly than fight

Assuming that everything is going well, a solid risk manager/broker relationship can last for decades. But it isn't always about performance, says Colburn. “Relationships play a big part, so if there is a change of management (CFO, risk manager, treasurer) on either side, it can be a deal-breaker.” Sometimes pricing, terms and conditions can end a relationship, or service-related matters can be cited.

Public entities are required to periodically put their key service contracts out to bid—in Missouri, the maximum is every five years, although the public entity can choose to retain the incumbent broker, Perry says. She just went through the process: A selection committee reviewed the six bids and winnowed it down to three candidates, who they interviewed. The process typically takes several months. Based on the review, Columbia switched brokers, based on a combination of service and knowledge.

“It's not just about price, although price is an important element,” she says. “We do our selection based on a percentage or points: price is about 30% of the decision. The rest is based on the broker's knowledge, response and understanding of what we need.”

For Pearce, whose business last switched brokers in 2007 after the previous broker had been in place for well over a decade, the decision came down to the need for re-evaluation. “We felt that we needed to enter into a 'master broker' relationship, both for reasons of cost and to keep the broker's best talent on our account,” he says. “When we evaluate a new [broker] relationship, we have a special interest in how the broker's service offering will be sustained, month after month, once the salespeople and rainmakers have moved on to the next new business opportunity.

“As we evaluate our existing relationships, we consider whether the broker is doing what they promised, how they have shaped or influenced our carrier relationships, the quality and timeliness of execution and whether they have met the standard of being a trusted business partner who adds value as a consultative resource,” he adds.

Yet the decision to change brokers is often the result of the increased complexity of the risk. Liebowitz recalls that when he started at NYU eight years ago, the university retained several brokers, the largest of which had handled the business “longer than dinosaurs walked the earth.” But as the program grew and became more complicated, “having it fragmented across different brokers didn't work because claims can pass over several types of insurance and carriers,” he says. “D&O, general liability, those kinds of coverage can overlap, and it's not in our best interest to have each coverage with a different broker and carrier.”

And when considering a new broker, although price is always considered, it's seldom the determining factor. “My approach is to make sure our broker receives adequate compensation for the amount of time and expertise,” says Zimmel of Tucson Electric Power. “Therefore, in a request for proposal I am leery about very low quotes trying to buy the business. Insufficient compensation to the broker would just set us up for insufficient service in the long run.”

Words of wisdom

At the end of the day, the best way a broker can ensure a lasting relationship with its risk manager partners is to focus on keeping current with emerging risk issues, educating clients on these changes and providing creative options to protect their businesses against harm, says Colburn at Marsh.

“Risk managers want to be presented with choices and options, but in a thoughtful, creative way,” he says. “Then talk them through what's best for their situation. The more you act like that, the better the relationship.”

When asked to boil it down to three main attributes, Liebowitz says he looks for “seamless global service, transparency, and getting the job done. Understand my risk and make me feel like the only client.”