CORPORATE INSURANCE
CONSULTING (INCLUDING ALL FORMATS OF COMMERCIAL AND BUSINESS
ENTITIES)
This is the mainstay of Satori's
business. While we prefer to take a holistic and integrated
approach to corporate consulting, we can, for illustration
purposes, select and break out some common components of our
work. We regularly review existing insurance programs for
corporate accounts; analyze risk factors and determine methods of
risk elimination, reduction, or transference through insurance or
other methods; design optimum programs; educate the corporate
risk managers when asked to do so; aid in the broker selection
process, should a change in broker be indicated; monitor claims
and dividends; review lease requirements, and in general act as
advisors to management. We do such work for local, regional,
national, and even international firms. Since this work is as
individualized to each firm as the firms themselves, there is no
set formula to be illustrated here. Nevertheless the following
material will offer some detail of these various components.
- REVIEW EXISTING INSURANCE
PROGRAMS
Most firms
that we work with are existing entities, although we have
worked with a number of start-ups, or even projected
ventures, and therefore the policies and programs are
"mature" from the standpoint of inspections,
audit histories, claim histories and the like. A
restricted review of existing policies might involve
checking carrier ratings, matching required underlying
coverages and limits for umbrella type coverages,
determining the consistency of coinsurance, contribution
clauses, and other clauses, endorsements, and edition
dates should there be multiple policies covering and
sharing the same risk. We would also check coverage and
audit classifications shown on the policies, and in
general, look for overlaps and/or gaps between policies.
In the more integrated approach we would measure existing
coverages against actual exposures, and this would be an
integral part of the risk management process. We could
list literally hundreds of sub tasks here, but since the
scope of each review is different, and tailored to the
specific company, we will simply state that a review of
existing policies can be quite comprehensive, and that
there have been very few situations, if any, that we have
not found material (though generally inadvertent) errors.
- ANALYZE RISK FACTORS, RISK
ELIMINATION, REDUCTION OR TRANSFERENCE
It is
absolutely imperative that risk exposures for any given
entity be determined and analyzed in depth for likelihood
of occurrence and for potential severity of impact. Too
often we see insurance agents and brokers attempting to
place coverage for exposures that could be managed in
other ways. A number of risk exposures can be eliminated
entirely, or significantly reduced, by changes in
operations and procedures. Risk transference can be done
via contracts, hold harmless agreements, being named as
an Additional Insured, utilizing Subrogation Waiver
endorsements, and, of course, through the insurance
process. Insurance must be measured on a cost, exposure,
benefit analysis basis. There are times when risk cannot
be eliminated, reduced, or transferred, and in such
situations simply knowing the nature and scope of that
risk, and planing for dealing with that risk, is of great
value.
- DESIGN OPTIMUM PROGRAMS
There
should be an overall plan and consistent methodology to
managing risk, especially insurance. A collection of
policies is not a program. Areas of concern such as
policy limits, deductibles, formats of coverage, and the
like, need to follow a logic, particularized to the
corporate or other entity. There is always a balance
between costs and benefits here, and an optimum program
is one in which the client rightfully perceives that
value for the dollar is more important than purely
minimizing costs, or overspending to cover relatively
trivial exposures. Self-insurance, or even no insurance,
may well be part of a program, so long as it is part of
the overall design criteria, and is selected with reason,
and full knowledge of the potential impact should a loss
occur.
- EDUCATE CORPORATE RISK
MANAGERS
We note
that many corporate entities, even those of of
substantial size, do not have a designated risk manager.
Often a bookkeeper or treasurer (we have even seen a
personnel manager) is de facto the "insurance
person" / risk manager. Few of these individuals
have any insurance training nor industry experience, but
though happenstance and work experience, find themselves
in the position of insurance "expert" and
buyer. In some instances, "risk management" is
equated with insurance, and the agent or broker becomes
the party making critical and expensive decisions for the
corporation. In our opinion, this is seldom the optimal
situation. Agents and brokers have vested interest in
selling insurance, and furthermore few really understand
many of the other business considerations. An employee as
risk manage is an ideal situation, but unless the firm is
quite large, this may not prove to be cost effective. Of
course one can hire an outside risk management firm, but
even then, there should be at least one person within the
firm that fully understands the nature of risk
management, and who can either make intelligent and
informed decisions, or make recommendations to the party
in the firm having ultimate responsibility. To this end,
we feel that time spent teaching and educating one or
more people in a corporate entity is certainly cost
effective. We can teach, lecture, or recommend formal
courses in insurance or risk management.
- AID IN THE BROKER SELECTION
PROCESS
A common
task that we are assigned deals with broker review or
replacement. Some corporate entities establish a
relationship with a broker, or brokerage house, that
lasts for many decades, while others choose to regularly
place a number of brokerages in completion for their
business - sometimes each year. While we feel that annual
broker competition leaves much to be desired, there are
good reasons to periodically review and evaluate a
brokerage's performance. Certainly there are situations
in which the client entity desires to either replace
their existing broker, or to at least consider that
possibility, through some form of broker interview or
competition. Sometimes the client simply wants to make
certain that their long term broker still is working as
effectively as possible towards the client's interest.
Once again this process is particularized to a given
entity, but to be effective, an outside consultant,
knowledgeable about the insurance industry, and just as
importantly, about the corporate client itself, can play
a most valuable role. Satori Associates, Inc. has
performed this task on a number of occasions, and for a
variety of types of companies. We can provide a Request
For Proposal to a number of brokers, review the responses
for compliance with the parameters of the request,
conduct interviews, compare premium quotations on a
number of levels, and make recommendations -both positive
and negative, as to the competing brokers. Of course, the
actual selection is made by the clients, but we normally
are retained to continue to monitor the actual placement
of coverages, and make certain that the ultimate policy
issuance matches that which was presented during the
broker competition.
- MONITOR CLAIMS AND
DIVIDENDS
We have already noted that few corporate entities
formally designate or employ a risk manager, but claims
and dividend monitoring should be part of that person's
duties. In the absence of a risk manager, it is unusual
that anyone in the firm monitors claims - especially
workers compensation or third part claims that are
covered by insurance. Agents and brokers will sometimes
attempt to keep the Insured informed by sending out
"Closing Statements", or upon request, loss
summaries (loss runs), but we come across very few
individuals in the corporate business world who can
understand them, or what really counts, their effect upon
future insurance rates. There are many ways in which an
Insured can minimize the costs of a claim, and while this
is not the forum for such a presentation, we can state
that we have been extremely effective in reducing overall
insurance costs though various processes that we utilize
as a result of monitoring claims. Dividends, generally
only found in workers compensation policies, should also
be monitored closely. We like to work closely with the
brokerage and carrier representatives to make certain
that claim reserves are as low as can be negotiated, and
that as many claims as possible be "closed", in
order to maximize potential dividends, and to lower
Experience Modifications.
- REVIEW LEASE REQUIREMENTS
There is no substitute for
competent legal advise in negotiating leases. One should
always consult with the corporate attorney prior
to signing leases for real or business personal property,
but in the real world we seldom find that this is the
case. Usually, the insurance broker is just told that the
entity has just leased a new building, computer, etc.,
and that a Certificate of Insurance is to be sent to some
lending and/or leasing company. Little attention is paid
to the actual wording of the lease, especially the hold
harmless clauses, until some loss occurs. Much grief and
expense can be eliminated if the insurance were to match
the lease requirements, if the lease terms could be
negotiated to eliminate much of the risk being
transferred onto the lessee, or if at least plans were
made in advance as to how an uninsured loss would be
dealt with. While we certainly would never offer any form
of legal advise - that is the sole realm of attorneys, we
are familiar with many forms of leases, and can offer
commentary concerning the potential applicability of
insurance to the situation. In reviewing leases for
larger multi-location corporate entities, we find little
consistency in the leases, but a "one size fits
all" insurance "solution". We can identify
many of these differentials between leases, and we can
recommend courses of action to deal with the problem.
- ACT AS ADVISORS TO
MANAGEMENT
We are
ongoing insurance and risk management consultants to a
number of corporate entities. They contact us on all
matters related to insurance before they call their
brokers to report new claims, add locations, equipment,
or vehicles, and in general act a liaison to the brokers,
adjusters, and auditors. In fact, because we know so much
about the operations of the firms with which we work, we
sometimes are considered as though we were an informal
non-designated board member - at least in relationship to
any operation or plan involving material risks. We are a
valuable resource to our long term clients as we aid in
controlling costs and risks, while we educate their
staffs in the nuances of insurance.
There are, of course, many other
areas in which we regularly act as a consultant to our corporate
clients. While our automation consulting is specialized to
insurance agent and broker automation consulting, there is a
great deal of overlap with other industries, and upon occasion we
make use of our automation skills to aid in solving a wide
variety of computer related problems.
Our fees can be based on an
hourly rate basis, monthly or annual retainer fees, fixed fees,
maximum and minimum fee schedules, or combinations of all or any
of these. We would be glad to discuss fee determination methods
upon request.
Last revision: August 25, 1997
