RiskProNet Members Find That Loss Control Departments Help Retain Clients

MENLO PARK, Calif.--(BUSINESS WIRE)--Oct. 12, 2004--Looking for a way to keep clients from straying?

An internal loss control department is a major factor in retaining clients who might look elsewhere if they were considering price alone, according to members of RiskProNet International, a network of 28 leading independent insurance brokers in the United States and Canada.

“We do know it helps with carrier relationships and strengthens our position at renewal time”

Almost equally important is the ability to differentiate the agency in talking to prospective clients, say RiskProNet members with loss control departments.

Among the RiskProNet members with the oldest loss control departments are Rebsamen Insurance in Little Rock Ark.; J.W. Terrill, Inc. in Chesterfield, Mo.; and Brady, Chapman, Holland & Associates, Inc. (BCH) in Houston. Rebsamen has had a loss control department for more than 25 years, and the other two have had loss control departments for a decade.

"A loss control department has been a huge benefit for us. For the most part, insurance products can be sold by any agency," said Jeff Brady, president and chief executive officer at Brady, Chapman. "It's the value-added services that set you apart."

"We started our loss control department as a result of the workers comp crisis in the early 90s in Missouri," said Cot Fox, senior executive vice president at J. W. Terrill. "At one point 50 percent of the companies in Missouri were in the state pool. We realized that we needed professional loss control people to help us develop the ammunition to go the underwriters and get better policies for our clients. At the same time, we needed to help our clients control losses so they could be profitable accounts."

J. W. Terrill hired its first loss control specialist in 1991. There is now a staff of three. The agency frequently uses its loss control employees on business solicitation teams, along with accounts, claims and benefit managers. "Most of our staff comes from national brokers, and having them helps us compete," Fox added.

Charging for Loss Control Services

A difficult decision is determining how to charge for loss control services. At J. W. Terrill services are free, although the agency is considering imposing a charge for some accounts. "Offering all services on a complimentary basis means that we have to limit the services to smaller accounts," said Claude Garrett, executive vice president. "We need to balance revenue and service, and we're looking very closely at some sort of fee."

Brady, Chapman offers a combination of complimentary and fee-based services. All major clients receive a complimentary benchmarking analysis and proposed action plan. The ongoing services needed as well as the account's revenue dictate whether there is a charge, Brady said.

Fee-based services include safety training, safety audits, writing safety manuals and policy statements, as well as specific training such as defensive driving or forklift certification. The firm also offers premise or job site audits, including unannounced visits to locations to check on whether employees are, for example, wearing protective clothing, lifting heavy objects correctly, and following other safety procedures.

Rebsamen Insurance charges for its loss-control services as a value-added service and makes a small profit, according to President Al McDowell.

In some agencies with loss control departments, individual brokers pay for loss control services out of their commissions.

Where They're Most Effective

Loss control services are most important for accounts in the premium range of $100,000 to $500,000, Brady believes. "Larger accounts often have their own on-site staff where we become more of a mentor and coach. In this 'target' segment, we are the client's loss-control department. Even when we charge a fee, we can deliver the service for less than they would pay elsewhere."

"We started our department a year ago, and it has turned out to be one of the better things we've done," said Gene Seago, who heads the one-person loss control department at Merritt & McKenzie, Inc. in Atlanta.

"Stressing value-added services seems to be what all the sales gurus tell agencies," he continued. "But what services does one good agency offer that another good agency doesn't? We all issue certificates on a timely basis, return phone calls, answer questions, review accounts, and so on. So loss control is really the 'value-added' benefit to the client.

"It's hard to measure retention stats to know whether an account stays because of loss control alone. It is an added piece of the service pie, and we can only hope that a client will be more reluctant to go with an agency that doesn't offer this service.

"We do know it helps with carrier relationships and strengthens our position at renewal time," he added. "Word gets back to underwriting that issues are being resolved by an in-house person."

Merritt & McKenzie provides a safety Web site for clients, and sends at least one communication a week to all key accounts. "That means we're touching our clients 52 times a years as opposed to the four or five times a producer normally sees their accounts," he pointed out. "We feel that the additional contacts can only be a benefit to us."

"When we compete against the multi national brokers and larger regionals, we need a strong service presence to compete in the U.S. and abroad," said Tom Daggett, president of Tanner Insurance Brokers, Inc. in Pleasanton, Calif. "Our loss control person serves as a coordinator and advocate for the client, insuring that we are getting the strongest response team and results from the carriers.

"In addition, we have developed training programs that our loss control and claims analysts provide to our clients at different levels throughout their organizations. We provide these services as part of the overall fee structure. Very often, loss control, as part of our overall risk management services group, gives Tanner the edge in the broker selection process."

At Eustis Insurance in New Orleans, Vice President Ray Posecai Jr. noted that the loss control representative has been effective in preparing clients for OSHA audits. "It also has been a big help in preparing clients for carrier loss control inspections, as well as negotiating recommendations from carrier representatives."

Brady, Chapman has a staff of four, consisting of one state-certified loss control specialist who visits clients' locations, and three internal staff members who conduct claims mitigation/customer advocate support, loss-run and experience mod reviews and loss trend analysis for clients.

Biggest Challenges

Both agree on the two major challenges in running a loss control department.

The first is finding the right staff members. "When you hire technicians who are very good at delivering service, they aren't necessarily good at selling or marketing the services. Because of this we rely on our producers to find opportunities for our loss-control service, and we probably are missing some opportunities to fully deliver value to everyone who needs it as well as generate some additional revenue," Brady said.

"Many loss control people from major carriers are not marketing-oriented," added Garrett. "They're very narrowly focused in looking at loss control. On the agency side, you need to be proactive. We're looking for people who will help our clients and develop a trust factor that gives them confidence in us. Insurance carriers can demand that clients take certain steps or they won't write the policy. We don't have that kind of leverage, so we have to find people with the right personality who can balance what needs to be done with what the client is willing to do."

The second major challenge is measuring productivity. "It's very difficult to benchmark whether we are operating as efficiently as we could. Even the major insurance companies tell us they haven't found a good measure of productivity," Brady continued.

Although both agencies are firm believers in the value of their loss-control departments, Garrett cautioned agencies to be committed to the added expense. "You have to analyze whether it will be value-added service to your clients, and be sure everyone agrees that the answer is 'yes.'"

"We were purchased by a bank 18 months ago," added Fox, "and they questioned whether we should make cuts in our loss control department. We kept the department -- after we explained its importance to our clients. Our clients know that our loss control department will advocate for them, and they recognize the value."

RiskProNet's 28 partners last year had combined revenues of approximately $546 million, giving the organization significant market strength. Each partner is an equal owner in the association, which gives its members the geographic diversity and shared knowledge base to serve clients with national, international or highly specialized exposures to risk. Total written premiums in 2003 were more than $5.3 billion.

RPNI members include AH&T Insurance, Virginia; Associated Financial Group dba CFG Insurance Services, Inc., Minnesota; Brady, Chapman, Holland & Assoc., Texas; Cambridge Underwriters, Michigan; Dawson Companies, Ohio; Diversified Risk Insurance Brokers, California; Eustis Insurance, Louisiana; Gateway Insurance Agency, Florida; J.W. Flynn Company, Indiana; Herbert L. Jamison Company, New Jersey; Interlink Partners, LLC, Texas; Johnson, Kendall & Johnson, Inc., Pennsylvania; Litchfield Insurance Group, Connecticut; J. Smith Lanier, Georgia; Marshall & Sterling, Inc., New York; Merritt & McKenzie, Georgia; Mesirow Insurance Services, Inc., Illinois; Mortenson, Matzelle & Meldrum, Inc., Wisconsin; Wick Pilcher Insurance, Arizona; Rebsamen Insurance, Arkansas; Reynolds & Reynolds, Iowa; Sterling & Sterling, Inc., New York; SullivanCurtisMonroe Insurance Brokers, California; Talbot Agency, N.M.; Tanner Insurance Brokers, Inc., Calif.; J.W. Terrill, Inc., Missouri; and Watson Insurance, North Carolina. B.F. Lorenzetti & Assn. is based in Toronto, Canada.

RiskProNet International is headquartered in Menlo Park, Calif. Additional information is available on the Internet at www.riskpronet.com or by calling Executive Director Gary Normington at 650-323-1929.

Note to Editors: A color graph is available upon request.