Oftentimes, when we’re working with our clients, they’ll see the wealth of knowledge we have about insurance, and they will ask for broader insurance-related advice. When these questions reach outside our immediate area of expertise, we remind them that it’s always smart to consult with experts who work in the specific area in question.
At SMW, we try to educate consumers about the insurance industry so they can make better decisions and optimize their insurance investments. As part of that education, we highlight the various professionals that policyholders might encounter during an insurance claim.
Sometimes when we get a new claim, we see that the coverages are insufficient and many insureds are woefully underinsured. One of the insurance professionals who can help with such matters – the “insurance advisor” – is well worth getting to know. Insurance advisors typically provide risk management and insurance consulting services. Think of them as an objective guide to navigating risk.
We recently spoke with one of our very favorite insurance advisors, who gave us rich insights about this role. To get a clearer idea of what the insurance advisor does, we want to provide this general profile to give you a sense of how someone comes to this role and what it entails.
Understanding the insured’s business
When an insurance broker begins working with a new client, the first order of business should be understanding the client’s exposures to loss. Insurance brokers haven’t always been interested in this exercise. After all, they get paid to “sell product,” not examine potential risks. This gap is where the risk management industry comes in – insurance advisors work to understand the insured’s business.
When insurance advisors take on a new client, they take the time to carefully interview them. They study what the business does; they review the business contracts and existing insurance. Then the insurance advisor identifies every exposure to potential loss that the business has – you name it, they study it. By understanding the most minute details of exposure to loss, insurance advisors help that business contractually extend identified risks to others. That insulates them and their insurers from losses. When businesses are buying insurance, it helps them considerably if they can point to this.
Then the insurance advisor identifies what the client can self-insure (and what they can’t). This clarifies what insurance they can buy and ensures that it’s appropriate and properly written.
Today’s challenging environment
By scrutinizing the business contracts, the insurance advisor helps businesses navigate today’s complex insurance industry. Just look at the real estate vertical, for example. Insurance carriers today might not even want to provide real estate insurance. Carriers are offering less coverage, and it’s harder to get.
The more difficult the insurance market becomes, the more people should realize that insurance advisors can provide help. How? By at least mitigating the things insurance companies want to do. This lessens the impact. Most insurance advisors have a robust database in terms of which insurers are doing what.
A few years ago, insurers instituted the Crime Index. If a business property’s geographical location is close to criminal activity, carriers might scoop them up and paint them with that brush. Suppose that 2 miles away from your property, there is an area of bad crime. This gives carriers ammunition to say they either won’t insure your property, OR they will put in detentions for bad activity. They assign numbers to each property, and they introduce a large deductible to any properties that exceed the ‘safe number.’ An insurance advisor can help fight back against this.
Helping property owners mitigate losses before an event
Insurance advisors are not loss control experts, but they can empower their clients to focus on pre-loss mitigation. This is part of an insurance advisor’s approach of trying to separate clients and their focus. That way, underwriters will view them favorably in terms of risk.
Pre-loss self-inspections help do that. Slip-and-fall cases happen a lot in the Northeast, for example, so a good insurance advisor might counsel clients to do ‘snow removal logs’ detailing exactly when shoveling and plowing occurred. If someone falls, the business can point to the moment when they actually cleared the snow as part of their defense. Oftentimes, the claim either goes away or it’s greatly reduced because they have less negligence.
The over-arching goal of an insurance advisor is to make the business more risk conscious. This separates them from every other submission that underwriters are looking at. The insurance advisor might talk management capabilities and capital investment so the underwriter will appreciate that the client business is re-investing rather than squeezing profit. These tools, adopted by the business on the recommendation of the insurance advisor, result in better treatment from underwriters.
Commercial v. homeowner work
Many insurance advisors focus primarily on commercial work. But there are fun accounts with homeowners, as well. If you have a high net-worth client, there are high-end items that might require this business service – submarines, jets, yachts, castles – wild stuff that only really super-rich, high-net worth individuals own. And they need help. Some of the exposures they have are as complex as their companies.’ So, a homeowner’s coverage might develop around that.
Risk management vs insurance agent
A smart insurance advisor will be respectful and collaborative with insurance brokers. Brokers have their role – and insurance advisors have to work professionally with them. A constructive relationship is key.
Insurance advisors should avoid directing their clients to any particular broker, and should instead choose to work with those brokers with whom their clients have existing relationships. If the client is ready to seek a new broker, the insurance advisor can recommend someone. One thing to request is a ‘service plan’ – a written document from a potential broker that says ‘this is what the broker will do.’ That way, expectations are shared and all parties can identify whether or not they’re being met.
Optimize your insurance investment
We hope this industry profile helps you understand what an insurance advisor does. If you have any additional questions, please contact SMW at any time.
