The Vendor Must Be Monitored, Just As You Would An Employee
Independent agents and brokers are expected to provide a multitude of services for their clients and the companies they represent; however, many don't have the internal staff to provide them effectively. The good news is that many excellent third-party vendors are available as an extension of your agency or brokerage office. The services available from these vendors are as varied as the policies you write. Claims adjusting, loss prevention, data analysis, communications and technology are just some of the services that can be delegated.
The key to success with such a vendor is matching its expertise with the needs of the agency. National vendors may be best for one agency while a regional or local provider would be better for another. The process doesn't end with the selection though . The vendor must be monitored, just as you would an employee, to ensure that they properly represent your agency.
Expand Service And Capabilities With Outside Support
Third-party providers can help you help your clients-and set you apart from competitors
By Dave Willis
Independent agents and brokers pride themselves on delivering creative solutions and top-notch service to businesses of all types. For many customers, it's a relatively straightforward process. Some commercial clients, for example, can benefit from agency or brokerage in-house services. Others tap carrier resources.
But for some insureds, you need to think outside the box and bring extra horsepower to the process. That's where independent service providers come into play. Outside resources that agencies and brokerages might want to tap include those offering loss control support and claims administration services.
John Ketch, senior vice president of Engle Martin Claims Administrative Services, the third-party administrator (TPA) arm of claims service provider Engle Martin & Associates, points out that his business is tied to insurance market cycles. "When the insurance market is hard and it's difficult to place business, corporations tend to become open to things like self-insured retention and formation of a captive or risk retention group," he explains. "When they decide to go that route, they'll need a third-party administrator to help them adjudicate claims that would fall within their retention layer."
Data and data analytics also are seeing increased attention. "There's increased pressure not only to do a good claims adjustment, but also to supply robust data back to clients to help them with reserving and IBNR numbers, as well as for risk management measures," Ketch observes.
"We're pushed to deliver good claims service, of course, but also to deliver a lot of metrics," he adds. For example, sharing claims data that show the frequency and location of certain losses can help insureds take action to prevent similar incidents going forward.
Regulatory and compliance issues also come into play. "Understanding the regulatory environment, both in the United States as well as in jurisdictions outside the United States where our partners are domiciled such as Lloyd's of London, is important," Ketch emphasizes. He points out that, especially for companies with self-insured retentions, a number of factors-ranging from Medicaid and Medicare provisions to money-laundering and terrorism-related issues addressed by the Treasury Department's Office of Foreign Assets Control-require expertise to which insureds and their agents and brokers might not otherwise have access.
"Good TPAs recognize that the value they bring to the table extends far beyond, say, the handling of a claim," Ketch notes. "Even those working domestically need to be aware of nuances of the various states, each of which has its own set of rules. We need to have adjusters licensed and knowledgeable within each of the states in which a loss could occur."
The loss control services arena has its own set of issues and trends. "Over the last three years, there has been a paradigm shift in the loss control vendor market," explains Bart Sturgis, president of Preferred Reports, a nationwide risk control provider that serves carriers, MGAs, program administrators, and brokers for all lines of coverage. "New players have emerged, bringing with them sophisticated technology."
He points out that this is partially a response to the advancements in available technology. "It's also in part a response to a talent pool that continues to shrink," Sturgis notes. "To compensate for the 'brain drain,' for example, the latest generation of loss control technology leverages embedded rules-based algorithms."
Another trend is the increased emphasis that's being placed on vendor management. "We're seeing agencies, brokers and carriers paying greater attention to the risk to reputation and underwriting performance service that providers generate," Sturgis remarks. "For this reason, there is an increased focus on assessing and managing vendor performance. This trend is leading to more vendor audits and ultimately a paring down of the number of service vendors used by agencies and brokerages."
Helping agents and brokers
Ketch says independent agents and brokers can benefit from the expertise and market presence service providers offer. "They can leverage our expertise and knowledge in a number of areas, including the key provider relationships we have," he notes. "That goes for everything from defense counsel to someone to board up a building that's suffered a fire. We work with a lot of firms and can help agents get experts out to assist their valued insureds."
Sturgis points out that service providers are uniquely positioned to create a positive-or negative-impression of an agency or brokerage. "That's why it is, at a very basic level, especially important for an agent or broker to expect his or her vendor to maintain and adhere to standards of service specific to their book. In the eyes of the insured, they're an extension of the agency or brokerage."
At a higher level, he notes, "Service providers using the latest technology with embedded rules-based algorithms can create huge efficiencies for an underwriting staff. Policies with issues contrary to underwriting guidelines are flagged, allowing the underwriting team to focus on its priority task." Sturgis adds that these technologies allow for effective delivery of recommendations and instant access to data and data trending tools.
Ketch agrees with the importance of actionable data. "It's not a stretch to say that aggregated or big data is as important as the claim adjustment itself," he comments. "That said, we've made great strides in providing customers real-time, online access to data about claims in process, and that's tremendously valuable as well."
Data, metrics and service providers' understanding of it help agents and brokers and their customers in other ways. "We see what's happening with other risks and what works well in other outsourced programs, and we can provide that insight and education to agents and brokers for use on their own accounts," Sturgis adds.
Knowledge of alternative mechanisms and cross-jurisdictional issues also can bring value to agents and brokers. "We bring a wealth of knowledge to the table on how to work with a risk retention group or other program," Ketch notes. "We're also used to working with large accounts with multiple sites, so that information is useful as well."
He adds, "When independent agents, who are most used to first-dollar programs, need to look outside the box for ways to save premium dollars and gain control, we can be a resource. Some agents may be hesitant to reach out to someone like us if they don't have a claim to give us, but I think they'd find we'd be more than willing to chat with them and help them through what works well and what they should consider in these situations."
Getting engaged
Sturgis offers a few pointers for agents and brokers looking to align themselves with a service provider. "First of all," he says, "size does not matter! Talent, experience and the right geographic match are more important than size."
He also stresses the importance of automation. "Strong technologic capabilities are key," he says. "Look for a vendor with a fourth-generation technology platform to support your team and deliver service to your insureds."
Finally, he recommends checking references. "Don't enter into a new relationship with a service provider blindly," he advises. "Ask for at least four references from at least one of each: carrier, broker and agency."
Adds Ketch, "Don't be afraid to leverage the TPA marketplace. Don't be scared to pick up the phone and talk to us, especially when you're looking to think outside the box and offer your insureds and prospects something other than a traditional insurance policy-something your counterparts don't offer."
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