The trying tripartite relationship

Corporate risk managers, insurance brokers and underwriters have a number of shared goals. They want to protect a company, guard against risk, and prevent worst-case scenarios from happening. While you would expect the three sectors to have an excellent reputation for working together, sharing information, and finding the right coverage for every scenario, unfortunately this isn’t the case.

For years now, the tripartite relationship between corporate risk managers, underwriters and insurance brokers has been a source of frustration for the risk profession. But what is the cause of this problem? And why aren’t the three sectors working together in perfect harmony?

At a recent roundtable held by StrategicRisk and insurer Allianz, large corporates said they feel misunderstood by their underwriters. They say it is challenging to get the right kind of coverage and tailored solutions for industry-specific events. Corporates think insurers are siloed and think in categories (such as property, or liability) rather than taking a holistic view of a large company as a whole. Risk managers would like more flexible coverage that covers a wider range of potential events, but feel they don’t have the opportunity to tell underwriters what they want.

A key reason for the communication breakdown is the lack of a direct link between risk manager and underwriter. Brokers often hold the cards and act as the middleman, corporates say, something that often hinders communication. In the Asia-Pacific region, particularly in Australia, a company’s head of risk and insurance often deals solely with their broker.

In recent years, corporates have begun to question the value of the broker service, and feel advice provided is overly transactional and focused on premiums and fees. At the recent roundtable, risk managers told us they don’t feel like their broker helps them achieve their goals. They say their insurance needs are often lost in translation.

Risk managers believe brokers are protective of their clients and make it difficult for companies to get face time with underwriters. While RMs have noted an improvement in recent years, particularly in Australia, there is still some way to go across the Asia-Pacific region. Surely, if risk teams and underwriters opened up more direct channels, corporates would be in a better position to outline the coverage they need and why they want it.

What can insurers do? As risk management teams become more advanced in their approach, more companies will look to open up a regular dialogue with their underwriter. Corporates also want their underwriter to proactively start conversations about risk. It should suit both parties: corporates will get a clearer picture of how their premiums are priced and the limitations of their coverage, while insurers will gain a better understanding of a company’s risk profile and be able to look beyond the numbers. A more open approach may prove valuable when the time comes to claim.

Corporates also expressed concerns insurance arrangements aren’t comprehensive enough to deal with emerging risks that may not fall under traditional categories. Risk managers believe insurers stick to risks they are comfortable with and can assess with reams of data. They believe the growing threat from cyber, terrorism or reputational risk is not adequately covered. A stronger conversation between risk manager, broker, and insurer will go some way to tackling these emerging issues.

We should expect greater dialogue between risk teams and insurers in the future as insurers increase their focus on risk awareness and mitigation through partnering with corporate clients. Part of the approach will involve spending more time on risk prevention, and insurers working with corporate risk managers to identify sector-specific issues. Data analytics will also play a crucial role in identifying and analysing risk trends. Analytics will help insurers present emerging dangers to clients, and help corporates highlight risks to underwriters.

While insurers and corporates are keen for a more open dialogue, brokers remain integral to a smooth-running tripartite relationship. Brokers have an essential role in managing the relationship and making sure the aftermath of an event is handled correctly. The tripartite relationship is ripe for change, however. As the risk sector becomes more sophisticated, brokers must help corporates communicate. Brokers should facilitate risk management, rather than act as gatekeepers to insurers. The message from corporates is clear: if brokers do not change, the tripartite relationship could become a two-way conversation.