Is insurance consulting right for you?
Here’s a look at the consultant’s roles and responsibilities, as well as how to become one.
I recently wrote about how how insurance agents and brokers need to become entrepreneurs in addition to being good at insurance, and noted various ways to increase revenue growth through horizontal and vertical diversification.
One option that is also available — and often overlooked — is adding fee income via insurance consulting as a source of revenue.
Pressing questions
Should agents and brokers add consulting services as an additional revenue source? If so, what’s required, what are the pros and cons, and what exactly does an insurance consultant do, anyway?
To help with this topic, I reached out to John K. Mulvey, principal of WLF Consulting LLC in the New York City Metro area. John has an extensive insurance background: He was a commercial underwriter and marketing rep for a large insurance company, became an owner and partner in a multi-line independent agency for more than three decades, and has served as a senior vice president with a bank-owned agency. He initiated consulting as a revenue stream for the agency, and has continued to grow his business as a full-time insurance consultant.
Emphatically, John feels that for the agents and brokers capable of learning the skills necessary to do risk analysis, there are several major benefits. It adds to their expertise, and they become more skilled and knowledgeable through their continued learning, which in turn benefits their insurance clients. That’s great for retention.
They also become better equipped to target-market their agency and prospect to larger, more sophisticated customers, and the consulting fees can become an important separate revenue stream.
John adds one major caveat: You cannot be a consultant for the same client for whom you serve as an agent or broker. This would be an ethical conflict of interest. Your consulting clients and insurance clients have to be separate.
The consultant’s to-do list
Here are some examples of typical insurance consulting services that can be provided to clients:
- Risk Analysis: This includes a review of a firm’s entire operations and facilities to detect and identify major exposures to loss both catastrophic and minor, what exposures should be either insured or retained, and making sure that all entities are included in the insurance program.
- Loss Control: Consultants assist clients with loss prevention activities and compliance with insurance company loss-control recommendations.
- Claims Review: They might conduct periodical (three to six months) review of claims with the client and the carrier, and remain involved in decision-making for setting reserves and claim settlements.
- Broker Selection: Consultants can determine the expertise of a client’s insurance broker and conduct a personal interview with any broker to be engaged.
- Workers’ Compensation: They conduct annual experience modification analysis.
- Requests for Proposals: They create RFPs and review all insurance bids and specifications for coverage and determination of competitive pricing.
- Carriers: Consultants often determine whether insurance companies are admitted or non-admitted, and review their ratings and financial strength.
Business tap dance
Although brokers don’t always relish when a client engages an insurance consultant, in John’s experience the client usually accepts all the consultant’s recommendations. Clients need the non-conflicted opinion on their insurance programs, as there is no vested interest in commissions. The consultant is hired for a fixed fee, not contingent upon how much or how little the client buys.
Agents and brokers can become capable of improving their skills to offer consulting by taking insurance courses like CPCU or CIC, insurance company training, college-level courses, and good old on-the-job training coupled with years of experience in the business. There is a growing need for insurance consulting today, especially for smaller and midsized clients due to the new exposures to loss arising from cyber and other often-unrecognized perils that are very real threats to business.
John K. Mulvey can be contacted at john@wlfconsulting.com.
Barry Seigerman (bmseigerman@gmail.com) is an independent broker/producer. The opinions expressed here are the author’s own.
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