FREQUENTLY ASKED QUESTIONS

WHAT IS A RISK MANAGEMENT CONSULTANT?

A Risk Management Consultant can provide advisory expert consultation on conventional insurance, self-insurance, claims management, loss prevention, and project advisory. They provide risk-benefit analysis and strategic recommendations on how to protect you from losses while maximizing your benefits. The goal is cost-effective programs that minimize cost while maximizing protections against risk. A Risk Management Consultant can also serve as the outsourced Risk Manager for firms that do not have a full-time in-house risk management professional.

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WHAT DOES A RISK MANAGEMENT CONSULTANT DO?

The work performed by Risk Management Consultants can be divided into these general classes: Insurance Program reviews, outsourced Risk Management services, and special projects. Some areas of application are:

• Risk Management Assessment
• Due Diligence Reviews
• Insurance Program Specifications, Marketing Coordination, Proposal Review, and Recommendations for Coverage Placement
• Broker Evaluation and Selection
• Review Contracts for Risk Management and Insurance Implications
• Claims Management
• Employee Benefits

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WHAT IS THE DIFFERENCE BETWEEN INSURANCE BROKERS AND RISK MANAGEMENT CONSULTANTS?

Independent Risk Management and Insurance Consultants do not sell insurance. When comparing consultants with an insurance broker, you need to consider their perspective and objectivity. Independent Risk Management Consultants are not affiliated or associated with any firms that sell insurance, are paid by their clients, and do not receive a commission. The potential gain or loss of commission income does not affect the recommendation process, thereby eliminating any potential conflict of interest. At the end of the day, the primary business activity of most insurance agents/brokers is insurance sales, and it is the Risk Management Consultant that provides the independent objectivity to represent their client’s best interest.

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CAN’T MY LONG-TERM INSURANCE BROKER DO THIS?

(also known as “Can the Fox Guard the Henhouse?)

In some cases, yes, however for many insurance brokers, complacency sets in and your account operates on “auto-pilot”. As with all business decisions, it is good to periodically step back and evaluate whether what has been done in the past is good for the future. Some insurance agents/brokers may have provided exceptional service and been good as your business partner at one point in time, but their growth and sophistication may not have kept up with your business needs. While some brokers are excellent client-oriented service professionals, others show little incentive to reduce premiums, uncover gaps in your coverage and/or seek out coverage enhancements. In short, most agents/brokers make money by selling insurance policies and only have access to a limited number of insurance markets. Therefore, your insurance broker is only as good as the companies they have access to, and have a legal fiduciary obligation to the insurance company paying their commission – not to their client. As independent Risk Management Consultants, SRA has developed relationships around the globe and over 40 years of finding not only insurance solutions but other creative, proven solutions that can provide cost/coverage effective results.

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HOW DO I KNOW I NEED A RISK MANAGEMENT CONSULTANT?

Hopefully, you recognize a few signs prior to a preventable loss. Those signs could be:

• You never even considered how to mitigate risk
• You know you need to put some risk management efforts into place, but are unsure where to start
• You have had some programs in place for a while, and you are unsure if they are the best and most cost-effective solutions

Most of the clients that have chosen to retain Strategic Risk Advisors find that:

• They have a specific specialized exposure need. Examples of this might be Professional Liability, International Exposures, or complex organizational/operational structures.
• They operate in specialized areas such as Financial Services, Real Estate Development/Management, or have closely held or family-controlled ownership.

Have lean operational and home office staffing, but recognize the benefits of having professional Risk Management and prefer to have a knowledgeable indivdual to handle the analytic, management, and administrative functions.

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WHAT IS TOTAL COST OF RISK (TCOR)?

For many companies, they consider the cost of insurance to be the cost of purchasing insurance policies from insurance companies. Total Cost of Risk looks beyond the insurance premium and incorporates other related and ancillary costs such as uninsured losses, deductibles/retentions, claim adjusting fees and the cost of defense counsel.

TCoR is a comprehensive quantifiable analysis and because of that, it is controllable and manageable if you can identify and develop strategies to manage these costs.

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WHAT IS THE DIFFERENCE IN AN INSURANCE AGENT AND AN INSURANCE BROKER?

Many people use these terms interchangeably, and some insurance professionals may function in either capacity. The technical difference, however, is quite simple – to whom do they have a legal fiduciary or agency relationship. If your insurance professional or their firm has a direct contract with the insurance company to sell their products, they are legal representatives of the insurance company. If they are receiving commissions from the insurance company, they may have a fiduciary obligation to the insurer. However, if they truly function as a broker sourcing insurance from companies with whom they are not directly contracted, and receive their compensation from you, then they are Insurance Brokers and have a legal fiduciary obligation only to your organization.

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WHAT IS THE DIFFERENCE IN AN INSURANCE DEDUCTIBLE AND A RETENTION?

Functionally they are very similar – this is the amount of a claim or loss for which you are responsible before the insurance company becomes financially involved. However, with a liability policy deductible, the insurance company will likely resolve the claim and bill you the deductible, and if our company is unable to pay the deductible, the insurance company is still legally obligated. With a retention, the insurance company has no obligation – this is a direct obligation of the insured organization and in some cases must be paid before the insurance company will pay their share of a claim. Both retentions and deductibles are part of the Total Cost of Risk (TcoR) and are often delineated by their amount – the larger the insured company’s obligation, the more likely it is a retention.

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