the role of the broker as the advocate of the insurance buyer
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The Role of the Broker as the advocate of the Insurance Buyer . JANUARY 26, 2012. Andrew F. Steptowe Managing Director Houston, TX. Marsh & McLennan Companies Inc. - PowerPoint PPT PresentationTRANSCRIPT
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The Role of the Broker as the advocate of the Insurance Buyer
JANUARY 26, 2012
Andrew F. SteptoweManaging Director
Houston, TX
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2MARSH
Marsh & McLennan Companies Inc.
MMC is a global professional services firm that helps clients identify, plan for and respond to critical business issues and risks by providing analysis, advice and transactional services.
MMC’s subsidiaries:
•Marsh
•Guy Carpenter
•Mercer
•Oliver Wyman
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3MARSH
Marsh Global Energy - Locations
New York
Calgary
San Francisco
Oslo
Singapore
Calgary
Houston
London
Oslo
Dubai
SingaporeEnergy Teams in:• Tulsa• Dallas• New Orleans
Madrid
• 300+ employees helping c. 1,750 clients globally
• Placing approx. USD 1.8 Billion in insurance premiums into energy insurancemarkets, significantly more than any other broker.
• Integrated Global Practice, headquartered in Houston, Texas
• Energy practitioners in many more locations around the world
Perth
Sao Paulo
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4MARSH
Large Commercial Insurance Involves 3 Key Parties….
• The Client
• The Broker
• The Insurer
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5MARSH
In a world with no brokers…..
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6MARSH
So why the “Middle Man”?
• The Broker is an impartial advisor – not an Agent
• The Broker is able to best assimilate the risks faced by the Client to the products available from various Insurers
• The Broker is the advocate of the Insured not the Insurer
• The Broker also fulfills key administrative functions related to regulation and taxation
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7MARSH
What other important roles do brokers play?
• Development of new products
• Market analysis
• Distribution network for underwriters
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8MARSH
The competitive landscape in Houston
• GLOBAL BROKERS
– Marsh– Aon– Willis
• DOMESTIC BROKERS
– Alliant– Gallagher– Lockton– McGriff Seibels– John L.Wortham– USI
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MARSH
Being appointed by a Client….
“There are worse things in life than death.
Have you ever spent an evening
with an Insurance salesman?”Woody Allen
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10MARSH
How Brokers are chosen
• Usually multiple brokers are identified
• Certain key criteria will define the most likely candidates
• They are then asked to present a conceptual proposal based on a set of service and/or program requirements particular to the needs of the individual client
• Sometimes selection is made on an “assigned markets” basis
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11MARSH
The decision whom to appoint is usually both subjective and objective…..
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12MARSH
Having been appointed there is a great deal to be done before approaching Insurers:
• Gaining an in depth knowledge of the Clients business and operations
• Reviewing insurance policies currently in place to ensure the coverage provided is adequate
• Gaining an understanding of prior year losses and past experience
• Benchmarking limits and retentions with similar clients
• Assessing proposed premium levels against present market trends
• Identification of key Insurers
• Developing a marketing plan
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13MARSH
The Marsh 3D Model
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14MARSH
Benchmarking
• Brokers have access to a significant amount of key data from the clients that they work with
• Clients are always interested in the limits, retentions and premiums paid by their competitors
• Brokers are always interested in what deals have been done by whom for how much
• The end game is to leverage the information we have to get the right deal at the right price for the client. Very rarely is there only one option!
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15MARSH
Example Benchmarking
Account Exp
Date
Total Insured
Values
PD Deductible BI Deductible Net Rate on Values &
Full Indemnity
Period
Policy Limit
Company A May-10 $27,292,797,418 $5,000,000 30 Days 0.0307 $750,000,000
Company B Jul-10 $1,649,869,000 $1,000,000 30 Days 0.0737 $400,000,000
Oct-10 $332,732,460 $1,000,000 30 Days 0.0553 $50,000,000
Oct-10 $1,891,739,309 $10,000,000 21 Days 0.0375 $100,000,000
Oct-10 $1,593,073,036 $5,000,000 - 0.0303 $60,000,000
Jun-10 $1,147,873,615 $750,000 15 Days/ 45 Days
0.0631 $50,000,000
May-10 $10,424,635,829 $1,000,000 30 Days 0.0884 $405,000,000
May-10 $2,223,964,977 $1,000,000 45 Days 0.0788 $300,000,000
Sep-10 $34,530,620,982 $2,000,000 30 Days 0.0270 $750,000,000
Sep-10 $4,033,338,340 $2,000,000 45 Days 0.0669 Not Known
May-10 $1,030,685,100 $1,000,000 30 Days 0.2373 $230,000,000
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16MARSH
How do brokers evaluate which Underwriters to approach for a particular risk?
• Financial Stability
• A proven track record in a particular class of business:– Underwriting expertise– Risk Management capabilities– Claims capabilities
• An understanding of the industry in which the client operates
• Service
• Licensing
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17MARSH
Major Markets for Energy Business
• Domestic– ACE– Chartis– Chubb– Liberty– Starr– St Paul / Travelers– WR Berkley– Zurich
• Overseas– Lloyd’s– Munich Re– Swiss Re– GARD– AXA– Bermuda (XL, Torus, OCIL)– OIL
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18MARSH
The basic marketing plan
• Identify two or three “lead markets”
• Prepare a detailed underwriting submission
• Arrange face to face meetings between the Insured and Underwriters
• Negotiate!
• Obtain terms and discuss options with the Client
• Refine terms as necessary
• Select a market and bind the risk
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19MARSH
Setting Expectations
JANUARY FEBRUARY MARCH APRIL
22nd
Strategy meeting with Rowan & Marsh teams to discuss goals & any issues22nd -31st
Rowan to provide renewal information & Marsh to develop submission
1ST
Marsh to send submission to Market4TH – 8th
Underwriter visits & presentations, as requiredFebruaryOngoing marketing & information exchange
MarchOngoing marketing & information exchange10th –12th
Marsh to present renewal proposal to Rowan13th –20th
Rowan to provide Binding instructions
April –MayPolicies received, reviewed & sent to Rowan
ONGOING
Monitor program & provide superb day-to-day service
JANUARY FEBRUARY MARCH APRIL
22nd
Strategy meeting with Client & Marsh teams to discuss goals & any issues22nd -31st
Client to provide Risk Information
& Marsh to develop submission
1ST
Marsh to send submission to Market4TH – 8th
Underwriter visits & presentations, as requiredFebruaryOngoing marketing & information exchange
MarchOngoing marketing & information exchange10th –12th
Marsh to present renewal proposal to Client13th –20th
Client to provide Binding instructions
APRIL 1st
EFFECTIVE DATE
April –MayPolicies received, reviewed & sent to Client
ONGOING
Monitor program & provide superb day-to-day service
An Example of a marketing timeline
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20MARSH
After the deal is done….
• Issue all payment documentation
• Collect funds and pay insurers
• Issue documentation: Certificates, Auto ID cards, Policies etc.
• Prepare a summary of coverage
• Issue a claims procedure manual
• Maintain appropriate contact
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21MARSH
And most importantly….
NO SURPRISES!
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22MARSH
Thank you for your attention
I’m sure you must have some questions! …..
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