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The Role of the Broker as the advocate of the Insurance Buyer . JANUARY 26, 2012. Andrew F. Steptowe Managing Director Houston, TX. Marsh & McLennan Companies Inc. - PowerPoint PPT Presentation
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The Role of the Broker as the advocate of the Insurance Buyer
JANUARY 26, 2012
Andrew F. SteptoweManaging Director
Houston, TX
2MARSH
Marsh & McLennan Companies Inc.
MMC is a global professional services firm that helps clients identify, plan for and respond to critical business issues and risks by providing analysis, advice and transactional services.
MMC’s subsidiaries:
•Marsh
•Guy Carpenter
•Mercer
•Oliver Wyman
3MARSH
Marsh Global Energy - Locations
New York
Calgary
San Francisco
Oslo
Singapore
Calgary
Houston
London
Oslo
Dubai
SingaporeEnergy Teams in:• Tulsa• Dallas• New Orleans
Madrid
• 300+ employees helping c. 1,750 clients globally
• Placing approx. USD 1.8 Billion in insurance premiums into energy insurancemarkets, significantly more than any other broker.
• Integrated Global Practice, headquartered in Houston, Texas
• Energy practitioners in many more locations around the world
Perth
Sao Paulo
4MARSH
Large Commercial Insurance Involves 3 Key Parties….
• The Client
• The Broker
• The Insurer
5MARSH
In a world with no brokers…..
6MARSH
So why the “Middle Man”?
• The Broker is an impartial advisor – not an Agent
• The Broker is able to best assimilate the risks faced by the Client to the products available from various Insurers
• The Broker is the advocate of the Insured not the Insurer
• The Broker also fulfills key administrative functions related to regulation and taxation
7MARSH
What other important roles do brokers play?
• Development of new products
• Market analysis
• Distribution network for underwriters
8MARSH
The competitive landscape in Houston
• GLOBAL BROKERS
– Marsh– Aon– Willis
• DOMESTIC BROKERS
– Alliant– Gallagher– Lockton– McGriff Seibels– John L.Wortham– USI
MARSH
Being appointed by a Client….
“There are worse things in life than death.
Have you ever spent an evening
with an Insurance salesman?”Woody Allen
10MARSH
How Brokers are chosen
• Usually multiple brokers are identified
• Certain key criteria will define the most likely candidates
• They are then asked to present a conceptual proposal based on a set of service and/or program requirements particular to the needs of the individual client
• Sometimes selection is made on an “assigned markets” basis
11MARSH
The decision whom to appoint is usually both subjective and objective…..
12MARSH
Having been appointed there is a great deal to be done before approaching Insurers:
• Gaining an in depth knowledge of the Clients business and operations
• Reviewing insurance policies currently in place to ensure the coverage provided is adequate
• Gaining an understanding of prior year losses and past experience
• Benchmarking limits and retentions with similar clients
• Assessing proposed premium levels against present market trends
• Identification of key Insurers
• Developing a marketing plan
13MARSH
The Marsh 3D Model
14MARSH
Benchmarking
• Brokers have access to a significant amount of key data from the clients that they work with
• Clients are always interested in the limits, retentions and premiums paid by their competitors
• Brokers are always interested in what deals have been done by whom for how much
• The end game is to leverage the information we have to get the right deal at the right price for the client. Very rarely is there only one option!
15MARSH
Example Benchmarking
Account Exp
Date
Total Insured
Values
PD Deductible BI Deductible Net Rate on Values &
Full Indemnity
Period
Policy Limit
Company A May-10 $27,292,797,418 $5,000,000 30 Days 0.0307 $750,000,000
Company B Jul-10 $1,649,869,000 $1,000,000 30 Days 0.0737 $400,000,000
Oct-10 $332,732,460 $1,000,000 30 Days 0.0553 $50,000,000
Oct-10 $1,891,739,309 $10,000,000 21 Days 0.0375 $100,000,000
Oct-10 $1,593,073,036 $5,000,000 - 0.0303 $60,000,000
Jun-10 $1,147,873,615 $750,000 15 Days/ 45 Days
0.0631 $50,000,000
May-10 $10,424,635,829 $1,000,000 30 Days 0.0884 $405,000,000
May-10 $2,223,964,977 $1,000,000 45 Days 0.0788 $300,000,000
Sep-10 $34,530,620,982 $2,000,000 30 Days 0.0270 $750,000,000
Sep-10 $4,033,338,340 $2,000,000 45 Days 0.0669 Not Known
May-10 $1,030,685,100 $1,000,000 30 Days 0.2373 $230,000,000
16MARSH
How do brokers evaluate which Underwriters to approach for a particular risk?
• Financial Stability
• A proven track record in a particular class of business:– Underwriting expertise– Risk Management capabilities– Claims capabilities
• An understanding of the industry in which the client operates
• Service
• Licensing
17MARSH
Major Markets for Energy Business
• Domestic– ACE– Chartis– Chubb– Liberty– Starr– St Paul / Travelers– WR Berkley– Zurich
• Overseas– Lloyd’s– Munich Re– Swiss Re– GARD– AXA– Bermuda (XL, Torus, OCIL)– OIL
18MARSH
The basic marketing plan
• Identify two or three “lead markets”
• Prepare a detailed underwriting submission
• Arrange face to face meetings between the Insured and Underwriters
• Negotiate!
• Obtain terms and discuss options with the Client
• Refine terms as necessary
• Select a market and bind the risk
19MARSH
Setting Expectations
JANUARY FEBRUARY MARCH APRIL
22nd
Strategy meeting with Rowan & Marsh teams to discuss goals & any issues22nd -31st
Rowan to provide renewal information & Marsh to develop submission
1ST
Marsh to send submission to Market4TH – 8th
Underwriter visits & presentations, as requiredFebruaryOngoing marketing & information exchange
MarchOngoing marketing & information exchange10th –12th
Marsh to present renewal proposal to Rowan13th –20th
Rowan to provide Binding instructions
April –MayPolicies received, reviewed & sent to Rowan
ONGOING
Monitor program & provide superb day-to-day service
JANUARY FEBRUARY MARCH APRIL
22nd
Strategy meeting with Client & Marsh teams to discuss goals & any issues22nd -31st
Client to provide Risk Information
& Marsh to develop submission
1ST
Marsh to send submission to Market4TH – 8th
Underwriter visits & presentations, as requiredFebruaryOngoing marketing & information exchange
MarchOngoing marketing & information exchange10th –12th
Marsh to present renewal proposal to Client13th –20th
Client to provide Binding instructions
APRIL 1st
EFFECTIVE DATE
April –MayPolicies received, reviewed & sent to Client
ONGOING
Monitor program & provide superb day-to-day service
An Example of a marketing timeline
20MARSH
After the deal is done….
• Issue all payment documentation
• Collect funds and pay insurers
• Issue documentation: Certificates, Auto ID cards, Policies etc.
• Prepare a summary of coverage
• Issue a claims procedure manual
• Maintain appropriate contact
21MARSH
And most importantly….
NO SURPRISES!
22MARSH
Thank you for your attention
I’m sure you must have some questions! …..