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Beyond traditional broker relationships

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John J. Bullock often tells a story about skiing with his client, Lance J. Ewing, vp-risk management for Harrah's Entertainment Inc.

They had just arrived on a Colorado ski slope when Mr. Ewing spotted some youngsters jumping off a mound.

"He takes off, goes down the hill, comes up and hits the mound," said Mr. Bullock, president of Willis of Mississippi Inc., a Pascagoula-based unit of Willis Group Holdings Ltd.

When Mr. Bullock reached his friend of about five years following Mr. Ewing's emulation of the younger skiers, "it looked like a yard sale with (ski) poles and gloves" scattered about, Mr. Bullock said.

Mr. Ewing, who calls his friend and property insurance broker's yarns "Bullockisms," said that having such a relationship helps both the risk manager and broker do their jobs better. The bonding develops communication and trust, which are "the two most important qualities you should seek in a broker-client relationship," Mr. Ewing said.

Indeed, developing such a relationship served Mr. Ewing well when Hurricane Katrina struck and damaged or destroyed several Harrah's properties—and heavily damaged Mr. Bullock's home and the home of Mr. Bullock's father.

Despite his personal losses, Mr. Bullock's attention quickly turned to his client.

"John was calling me on his cell (phone) as he and his family were fleeing the hurricane and then came down to the Gulf Coast to assist us while his own home lay in ruin," Mr. Ewing said.

"That is pretty phenomenal, but Lance and (Mr. Bullock) have been longtime friends," said Roger Davis, director, claims management for Harrah's.

Prior to Harrah's 2005 acquisition of Caesars Entertainment Inc., Harrah's relied on four brokers while Caesars used two.

Mr. Ewing evaluated all six brokers and decided to keep one from each organization, said Debbie Burd, director of financial services, risk management for Harrah's.

The second broker Harrah's decided to retain was Atlanta-based Beecher Carlson Holdings Inc.

Broker selection is never an easy task, Mr. Ewing added. Brokers must know their clients' current and future needs, have the resources and personnel to meet those needs, and have strong relationships.

In developing a relationship with a broker, "get to know what makes them tick and what ticks them off," Mr. Ewing said. "It's a two-way street when it comes to trust. So the risk management professional has to be ready to admit they have made mistakes or dropped the ball. The broker does not make all the errors."

Mr. Ewing demands quality service and doesn't tolerate sloppy work from his vendors.

"He's got that innate ability to expect the best, and when you know what his expectations are, you damn sure don't want to fail," Mr. Bullock said. "So I think he brings out the best not only in Willis, but in myself."

Mr. Ewing said—to encourage the best work from brokers or any service provider—it is important to reward them for a job well done. Brokers are paid a performance-based fee rather than a commission, and part of that fee is at risk.

Mr. Ewing sets brokers' "incentives" by applying the Quality Improvement Process tool developed by the Risk & Insurance Management Society Inc. Mr. Ewing doesn't follow QIP recommendations precisely but does set broker performance criteria and defines measures.

Throughout the year, he lets brokers know how their performance is tracking, and he holds an annual review.

"We then determine if they hit on all cylinders," Mr. Ewing said.

"Brokers do not read tea leaves, read minds or have crystal balls," Mr. Ewing said. "The client has to tell the service providers what is expected and then inspect what you expect."

And Mr. Ewing is quicker than many risk managers to praise brokers' when praise is deserved, said Bradley Darr, senior client executive in Brentwood, Tenn., for Beecher Carlson.

"As demanding as he is, he is also fair, as every risk manager should be," said Mr. Darr, who places casualty coverage for Harrah's.

Mr. Ewing advises risk managers keep their sense of humor, and remember that brokers are human and will make mistakes.

"Your job in risk management is to point these out and, like a good computer, store it in long-term memory," Mr. Ewing said.