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What's more telling than a survey.

What's More Telling Than a Survey

Few surveys have inspired more controversy in the UK insurance community than the one recently published by the Risk & Insurance Research Group Ltd. It attempts to uncover the opinions of risk managers and brokers on the market for multinational insurance programs.

Five-hundred buyers and 500 brokers based in the United Kingdom were queried as to their views on insurers supplying multi-national insurance programs. The analyses and conclusions of their replies are, depending on who you're talking to, being endorsed, repudiated, criticized, misinterpreted, ignored and used to embarrass and cajole.

Indeed, brokers lost no time before visiting insurers, supposedly to place business, but not missing the chance to wave the report under their noses. Frankly, insurers are far from being inundated with congratulatory telegrams.

It is unfortunate that, as surveys involve so many members of the insurance market, no more than a handful of participants will ever be satisfied, since few emerge at the top of the ratings.

The survey question that rated the effectiveness of insurers as suppliers of international programs should be of special interest to American risk managers. Buyers and brokers rated the competence of insurers on a scale of one to 10 and gave the top two positions to U.S. insurers--American International Underwriters and Cigna.

The ratings of the top five insurers, expressed as percentages, are AIU, 71 percent; Cigna, 67 percent; Zurich, 66 percent; Royal, 62 percent; and Sun Alliance, 56 percent.

When asked to rate insurers' capabilities in 18 areas, such as claims service and settlement, risk engineering, cash flow, product innovation, reinsurance knowledge and understanding captives, the buyers indicated that the top five insurers varied according to their strong and weak points. However, a composite ranking was developed by assigning each first place 5 points, second place 4 points and so on that produced the following results: Zurich, 52 points; Factory Mutual, 51; AIU, 50; Cigna, 49; and Royal, 38.

From the buyers' comments, some generalities can be made. AIU turns out to be dominant in terms of technical skills, product innovation and international capability, but it is weak in documentation, claims service, claims settlement and loss reporting. It is also perceived as having the ability and network, but it lacks a high rating in providing day-to-day services.

The two UK companies, Sun Alliance and Royal, perform inversely to AIU, being strong in the service areas but weak technically and internationally. Although it never reached first place, Zurich was the only company among the top five to place in all 18 categories.

Significant issues emerging from the survey are the willingness of buyers in the United Kingdom to change their arrangements and their reasons for doing so. In addition, it showed the services they would like to buy on an unbundled basis. Over the last three years 44 percent of buyers changed the structure of their insurance program, 31 percent switched insurers, 21 percent changed brokers and 4 percent made no changes.

When it comes to choosing an insurer, buyers consider continuity and claims reputation most important, followed by loyalty. Whether a broker comes recommended, will deal direct and is UK-owned were the next determining factors. Price was deliberately omitted from the questionnaire.

Table I highlights how often buyers review various aspects of their programs. Brokers are reviewed less frequently than insurers, with the exception of after three years. The fact that less than half of insurers are reviewed each year supports the results of the previous question in which continuity was considered the most important factor in choosing an insurer.

Table II reveals the unbundled services buyers might obtain and from which sources. Most buyers indicated that they would chose several providers for each service. The more traditional loss control services are evenly divided over the three main sources--insurer, broker and independent specialist. Pollution loss control and information systems categories reflect the buyer's frustration over what is available from insurers and brokers. Brokers were found to dominate captive management and to have the largest share of claims handling. [Tabular Data I to II Omitted]

Chris F. Best is editor of Foresight, a London-based insurance and risk management journal published by Risk and Insurance Group Ltd.
COPYRIGHT 1990 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:survey of insurance brokers and risk managers on multinational insurance programs
Author:Best, Chris F.
Publication:Risk Management
Article Type:column
Date:Aug 1, 1990
Words:699
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