RISK MANAGEMENT
Fine-tune your consulting skills to maintain client confidence
By Donald S. Malecki, CPCU
Despite the wishes of some people, the hard market is likely to be around through 2003. Given that prediction, there's no better time than the present for producers to begin (or rekindle) the consulting process. It doesn't have to be a sophisticated process. Start off by looking at the various activities undertaken by a business and determining whether the basic insurance program is in order.
When meeting with clients to try to get a better fix on the exposures confronting them, producers don't have to play the role of lawyers and read contracts, barring only the insurance requirements. It makes good risk management sense to do so. Contracts, instead, are best left with lawyers or more experienced consultants who often work in concert with lawyers.
A visit with a client's chief financial officer and other department heads also pays dividends. The visit doesn't have to be long. In fact, a visit shouldn't be longer than 15 - 20 minutes. It's surprising how much one can learn about a company by talking to department heads. One reason is that department heads seldom communicate with one another about insurance-related exposures. But they have a lot of information to offer when probing questions are raised.
In one recent case, it was not until a producer visited one of his retailer clients and asked some of those probing questions that he discovered that the client was also in the trucking business as a common carrier. The producer was able to prevent a situation where the client might have had an accident and found itself without any coverage.
When visiting a client to discuss the upcoming renewal, one producer struck up a conversation about the client's new activities via the Internet. Specifically, the client was explaining how much success he was having generating sales by use of a Web site. The client said he could get hundreds of hits a day and at considerably less cost than if he were to do a direct mail campaign with high postage costs.
The producer, however, recalled an article he'd read on the pitfalls of using facsimiles. He informed his client that some businesses that engaged in this marketing practice were targets of a class action suit resulting in large verdicts against them. These actions were based on a statute enacted by Congress in 1991, which set $500 as the damages for each violation/illegal fax or telephone call, and triple damages if the violation is committed willfully and knowingly.
The producer's comments generated the question regarding whether there was any insurance coverage for this kind of suit. The producer had heard that personal and advertising injury liability (Coverage B) of a commercial general liability policy might cover this kind of an offense. However, once these class actions grow, he said, there is no telling when insurers would add another exclusion to the policy.
In this case, the producer, in probing the client's business affairs, offered some timely advice that could go a long way if the client were to be caught up in a class action. The client, of course, was not happy that his producer was the bearer of bad news, but he did respect the producer and sought additional advice from him.
Risk management process
The risk management process, as far as a producer's involvement is concerned, does not have to be complex. It may be as straightforward as the producer and client reviewing a checklist to go over what exposures exist and whether there is adequate coverage. It is surprising how many producers have found clients purchasing duplicative coverage or high limits on coverage that is virtually useless.
One example of duplicative coverage is a client who had purchased a fiduciary liability policy that included employee benefits liability coverage, and a separate employee benefits liability policy. Upon examining the client's coverage, the new producer discovered that for a number of years preceding service from the current producer, the client was paying for both policies when only one was necessary.
Which one should be canceled? The answer was easy because the fiduciary policy in question could not be written alone; it had to be combined with employee benefit liability coverage. The downside to this solution was that the client's umbrella policy would not apply excess over the fiduciary liability policy, but it would apply over employee benefit liability coverage. Another disadvantage was that the fiduciary liability policy, in combination with the employee benefits liability coverage, could be written for only one policy limit.
In the final analysis, the client must decide which coverages to select. While we don't know what the client decided, we do know that the producer in this case offered the service of pointing out not only the existence of duplicative coverage, but also the advantages and disadvantages of both types of policies.
The point is that producers can't be of assistance to their clients until they better understand the exposures, and that, without question, will require producers interacting with their clients on a higher level than simply serving as order-takers.
But if a producer chooses, there's nothing wrong with being an order-taker. In fact, it's a way of possibly playing it safe with respect to errors and omissions accusations. [See, for example, the October 1999 issue of this column titled "Addressing the 'Order-Taker'/'Consultant' Conundrum." The article can be accessed at the Rough Notes Web site: www.roughnotes.com/rnmagazine/
1999/october99/10p132.htm.] But if producers want to solidify their accounts and do something extra, now is the time to begin wearing the consulting hat. *
The author
Donald S. Malecki, CPCU, is chairman and CEO of Donald S. Malecki & Associates, Inc. He is an active member of the CPCU Society, serves on the Examination Committee of the American Institute for CPCU, and is an active member of the Society of Risk Management Consultants.