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Best insurance coverage comes with broker partnership

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Best insurance coverage comes with broker partnership

To maximize the short- and long-term value of an insurance broker's services, experts said mid-market companies should think of their broker less as a vendor and more an advocate, if not an outright partner.

To that end, investment of time and effort will be crucial for both parties. Buyers shouldn't be shy about asking for on-site visits from their broker at least once before their account is taken to market, if not on a regular basis, experts said.

“We thought it was important to bring the broker out and have him look at exactly what it is we have,” said Paul Brandel, risk manager at the Rockford Mass Transit District, a 140-employee transit agency that operates 17 bus routes in and around Rockford, Ill. “When he sees how the whole thing is set up, it puts him in a better position to answer specific questions from underwriters about the business.”

Brokers and their clients—and any applicable third-party consultants—should hold regular meetings either in person or over the phone to discuss new trends in coverage, risks and the insurance market on the whole, even if renewals are several months away. Mr. Brandel said those meetings also can be used to address significant changes in operations, holdings or workforce.

Mid-market clients also need to acclimate to the notion that they likely will be asked for at least some sensitive details of their business model, including financial statements, claim histories and banking covenants. If necessary, companies usually can obtain confidentiality agreements for such documents or information.

“You've got to be able to trust your broker to a certain extent,” Mr. Brandel said, adding that economic pressure to lower premiums should not automatically trump recommendations from a broker that might be more expensive at the policy onset, but could reduce losses and lower claims over time.

“I know I'm not my broker's only client, and I know he's seen a lot of things out there dealing with different carriers and clients,” Mr. Brandel said. “Your broker might have some ideas based on that experience that will ultimately help the business.”

One way in which companies can achieve a greater degree of trust in their broker's objectives is by contracting services on a fixed-fee basis as opposed to a commission-based agreement—in which the broker is paid a percentage of the premium price—thereby removing the specter of conflicting interests.

“We feel like this arrangement...really cements the relationship based on doing what's right for us,” said Jeremy Allen, director of risk management for Austin, Texas-based Cirrus Logic Inc., a 570-employee publicly traded semiconductor manufacturer. “We view our broker relationship as a partnership, and with this fee arrangement, I know my brokers are looking to procure the right policy for us at the best premium possible.”

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