Beyond Insurance

By F. Scott Addis, CPCU, CRA, CBWA, TRA

TRUSTED RISK ADVISOR®: CONSULTING AND DIAGNOSING RISK WITH AN ERM MODEL

Producers up their game by discovering their WHY, WHAT, and HOW

The Trusted Risk Advisor® (TRA) is a newly created certification that is designed to indicate the holder’s professional excellence in consultative and diagnostic sales and enterprise risk management (ERM).

“While participating professionals may enter the program with a proven track record of success, the TRA empowers them to sharpen arrows in their quiver, confirm that they have a growth mindset, and consider additional tools and tactics to significantly improve performance,” says April Baker, Beyond Insurance’s chief learning officer.

Goodbye Agent and Broker … Hello Trusted Risk Advisor

As an insurance and risk management professional, are you getting increasingly concerned and frustrated with industry perception, commoditization, and consumers’ addiction to the insurance bid?

If you responded affirmatively, you are not alone. Our research has found that over 90% of agents and brokers believe their growth potential is being impaired by the transactional nature of insurance and negative perception of the industry.

As an insurance and risk management professional, are you getting increasingly concerned and frustrated with industry perception, commoditization, and consumers’ addiction to the insurance bid?

“Unfortunately, I see so many talented agents and brokers stuck in a fixed mindset because of their perceived lack of control over outcomes,” says Baker.

The Trusted Risk Advisor certification learning begins with a session titled “Goodbye Agent and Broker … Hello Trusted Risk Advisor.” Here participants discover their purpose for existing … their cause … their WHY. The TRA program instills in industry professionals that their WHY is managing risk and uncertainties, supported by HOW … a process to strategically deal with them.

I believe today’s consumers are bored and uninspired with the actions and deliverables of the traditional agent or broker. I also believe that they are starving for a risk advisor who delivers a disciplined approach, planning process, and service standards that measure up to other professional advisors like the CPA, attorney, or investment counselor.

What is risk? Risk is best defined as “someone or something of value that is exposed to danger, harm, or loss.” Synonyms include danger, peril, and jeopardy. Risk management is the identification, assessment, and prioritization of risks followed by a coordinated application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities. The primary objective of risk management is to ensure that uncertainty does not derail the business endeavor or family from pursuing its goals.

If risk and uncertainty are the TRA’s WHY, then what is insurance? It is simply WHAT the agent or broker does … the products, services, functions, and deliverables he or she provides.

“When I discovered my WHY, I gained enhanced clarity, purpose, and passion. And I quickly noticed that my clients, prospects, centers of influence, underwriters, and colleagues treated me with more respect,” says Ralph Whitehurst Jr., AAI, CIC, CWCA, president and chief executive officer of Whitehurst Strategic Partners in Wake Forest, North Carolina.

What if your clients trusted you more?

A Trusted Risk Advisor scorecard is introduced as part of the training. It is supported by a thought-provoking exercise through which participants envision a world in which their clients trusted them more.

When they trust their agents more, clients:

• Seek their agents’ advice more often
• Are more inclined to accept and act on their agents’ recommendations
• Bring agents in on more advanced, complex, strategic issues
• Treat agents as professional consultants
• Elevate their respect of the agent
• Refer their agent to their friends and business acquaintances
• Lower the level of stress in their interactions with their agent
• Forgive their agents when they make a mistake
• Involve their agents when risks and issues begin to emerge, rather than later in the process (or maybe even call them first!)
• Trust their agents’ instincts and judgments

By focusing on the scorecard and exercise, participants realize the significance of “status”—one’s position in relation to others. When trust grows, so does one’s ability to influence.

“An elevated status grants responsibility, privilege, and esteem,” Baker says. “Others’ perception of you is raised by the out-growth of credibility and trust. When you are viewed more positively, you can influence and advise, thus changing the lives of those around you.”

TRA value proposition

In “Goodbye Agent and Broker … Hello Trusted Risk Advisor,” significant time is spent on the TRA’s value proposition. Because the primary focus is risk and risk management, its message differs significantly from that of the traditional agent or broker. The value proposition goes far beyond product or service descriptions to express the results that a consumer can expect to achieve. In developing his or her unique message, the Trusted Risk Advisor knows that:

• Value is created through a process-oriented, not product-oriented, approach
• Value is created when a problem (risk issue) is identified and solved
• A value proposition based solely on products, features, and/or pricing is not sustainable
• Solutions are a result of consulting and diagnosing risk issues

The Value Proposition Accelerator™ is a tool that enables participants to sharpen their message. It is supported by roleplays and videotaping. In the inaugural TRA program sponsored by the Independent Insurance Agents of North Carolina, Chief Executive Officer Aubie Knight, CIC, ARM, had the opportunity to review and evaluate the value proposition videos of all the program’s participants.

“I was so impressed with the depth and quality of the value proposition statements. They were clear, concise, and compelling. Most important, each message supported the TRA’s purpose for existence,” Knight said.

Risk Decision Matrix

It is the Trusted Risk Advisor’s responsibility to guide his or her prospect or client through four primary methods of dealing with risk—(1) avoid, (2) reduce, (3) transfer, or (4) retain. These strategies are illustrated above with a risk matrix, where the impact of a certain event stemming from exposure to a certain risk is plotted against the probability of that event’s happening.

As a standard practice, high-impact,high-probability risks should be avoided. High-impact, low-probability risks are transferred (e.g., insurance). High-probability, low-impact risks are to be reduced. Low-impact, low-probability risks are accepted or retained.

The traditional agent or broker has left the Risk Decision Matrix sitting dormant for the small and middle-market business segment as well as personal lines. It is sad that today’s consumers have come to believe that the agent and broker’s primary role is delivering products and services dominated by the insurance transaction. They do not see the Risk Decision Matrix as a top priority of their advisor.

The Risk Decision Matrix leads to risk profile improvement—the process of strategically dealing with the threats that confront an organization or a family. The TRA mindset is embraced by underwriters because the approach leverages all elements of the risk management process. Today’s underwriters not only want to gain a clear picture of an account but also desire a business partner who is designing and implementing proactive strategies to manage risk.

The TRA Method

The Risk Decision Matrix comes to life through the five-step TRA Method—a logical, disciplined, and results-oriented enterprise risk management framework. The five steps are briefly described below.

Step 1—Risk Identification: The first and most important step of discovery—the identification of exposures that could interfere with the achievement of an organization’s goals. This step begins with curiosity and a desire to understand the inner workings of a business or family.

Step 2—Risk Assessment: With knowledge of a client’s risks, the TRA can conduct a frequency and severity analysis using a prioritized exposure chart.

Step 3—Risk Evaluation: Here the TRA determines the degree to which he or she can alter the risk. The process includes a cost-benefit analysis of risk mitigation.

Step 4—Risk Action: Because TRAs have methodically identified, assessed, and evaluated risks, their credibility is off the charts. They are now qualified to implement action by developing a tailored program to protect their client’s assets. Actions will encompass risk avoidance, risk retention, contractual risk transfer, risk mitigation, and the transfer of risk through insurance.

Step 5—Monitoring the Plan: Organizations are dynamic. What works today may not work tomorrow. This means the plan must be monitored and adjusted as needed. When appropriate, the TRA uses metrics to move the client to the next level of protection.

Simply put, the Trusted Risk Advisor consults with clients and prospects and diagnoses risk using an ERM model.

The author

Scott Addis is chief executive officer of Beyond Insurance and an industry leader. His agency was recognized by Rough Notes magazine as a Marketing Agency of the Month, he was a Philadelphia finalist for Inc. Magazine’s “Entrepreneur of the Year” award, and he was selected as one of the “25 Most Innovative Agents in America.”

To learn more, contact Scott at saddis@beyondinsurance.com.