Risk managers: relations with brokers still fractured.

The relationship between risk managers and the brokerage community isn't healed.

Ellen Vinck, outgoing president of the Risk and Insurance Management Society and vice president of risk management and benefits for BAE Systems Ship Repair, said risk managers are frustrated with the insurance placement process. According to a RIMS survey, 60% of risk managers reported they didn't have a renewal quote 30 days before their contracts expired, and one in four waited until one week before the expiration to receive a new quote. If the client is unhappy with the renewal quote, that's too late to seek other options in the market without returning to the original carrier and asking for an extension on the existing policy, which can be a difficult, messy transaction.

In a discussion at the RIMS annual conference in Honolulu, the heads of brokers Marsh Inc., Aon Corp., Arthur J. Gallagher & Co. and Integro Ltd. addressed these concerns. Also joining the panel were the heads of insurers Ace INA, FM Global and American International Group Inc.

Gregory C. Case, president and chief executive officer of Aon, said once the terms and conditions are agreed upon, the time necessary to get a policy from an insurer to the broker and the client is less than 24 hours. He said Aon is measuring how quickly it follows up on paperwork and intends to "cut this in half by the end of the year. We have to deliver."

J. Patrick Gallagher, president and CEO of Arthur J. Gallagher, agreed it's a problem. "How many of you would move into a building without a lease?" Gallagher said, noting his company also is studying the problem.

Brian E. Dowd, chairman of Ace INA, said he tracks every contract that isn't out in 30 days. "We take this seriously," Dowd said.

Shivan Subramaniam, chairman and CEO of FM Global, said two-thirds of the company's policies are issued within 30 days of being bound. He said he'd like to see the day when there would be no need for a binder at all; the policy would be ready instead.

Martin J. Sullivan, president and CEO of AIG, suggested that perhaps some paperwork could be eliminated, especially for renewals.

While only 9% of risk managers surveyed said they had switched brokers in response to the broker investigations, about 40% said they thought the insurance placement practice had changed. Yet almost an equal number felt it was still business as usual, and 82% said they had seen no premium cut since their insurers had stopped paying contingent commissions.

Relationships are improving, Vinck said, but there's still more work to do.

RIMS Quality Survey

Most of the U.S. and Canadian risk managers who responded to a survey by the Risk and Insurance Management Society said they haven't been charged a lower premium by their insurer after contingent commissions were discontinued by the largest brokers. They also said that it often takes four months after the binder before they receive the completed policy.

Did you receive a premium reduction as a result of your insurer not paying contingent commissions to a broker?

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Have you changed your broker as a result of the regulatory inquiries and negative press?

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Source: RIMS 2006 Quality Survey