Home > Specialty Broker

Specialty Broker

The question whether a special broker for Financial Lines is needed or not is unimportant for bigger companies and leading insurance brokers nowadays. Coming to D&O Insurance it is all about which specialist will be mandated.

Specialists

In an ideal world, each risk would be looked after by the best specialists. However, that is almost impossible in practice. In the area of sports for example you will find no team, which currently has the best players on each position and for the future. In principle insurance brokers in comparison to other professionals – as e.g. physicians or lawyers – show a considerably lower level of specialization.

Generalists

In most cases the experienced broker perceives himself as a generalist. Whether on an executive level or as customer advisor, knowledge is expected on all levels. This concentrates and makes communication with the customer easier. Against the background of the shoreless matter a good generalist, who does not want to be mentioned, once said: “Someone, who has 30 % of the required knowledge in 70 % of all lines, is very good already.” In the commercial business such generalists and customer advisors are supported by other employees of their brokerage company. The workload is and must be allocated according to the area of responsibility. Each team has positions which are stronger and others which are engaged to a lesser extent. Oftentimes, the commercial customer initially does not know the people working in the background. Drawing the conclusion that a good generalist is also a good specialist, without further verification, might be convenient but not imperative.

Improving Communication

Direct intervention of a Financial Lines specialist and close connection to the beneficiary improves the communication and avoids errors. As is generally known, the number of errors increases as the line of communication elongates. Placement, administration, and claims handling of Financial Lines on a corporate level involve too many people: board members, risk managers, department and account managers, sales executives, underwriters and claims specialists – all in different departments –, lawyers or other external experts and so on. In practice there are cases even more complicated in structure. Just think about the involvement of several insurers, a third-party-notice in case of a claim, regresses or the like. In a claim’s scenario in-house counsel or external lawyers may be involved additionally. In the scope of D&O insurance coverage disputes are not unusual.

Oddly enough there is even a defense cost insurance product for D&O coverage claims on offer. Here it is not for instance an individual person and also it is not the insurance product which is the major cause for errors. It is in fact the organization of communication. A duly assigned broker avoids mistakes and shortens communication channels. Intervention of external advisors traditionally serves to improve the (internal) operational workflow of decision making in exceptional cases, which the internal reporting lines originally were not set up for.

Complex Border Segments

Rare and complicated boarder areas are the hotbed for specialization. This applies to the Financial Lines. They are boarder sections in the commercial business regularly accounting for only 1 to 8 % of the total insurance premiums. A Generalist, who has to focus on the other 92 - 99 % of the insurance sales, should at his own discretion consult a Financial Lines specialist. Someone, who has to look after all different segments himself, runs the risk of challenging his good services in main areas by making mistakes in boarder segments. In particular the exposure to D&O affords an opportunity to either distinguish oneself vis-à-vis the corporate management or not.

Definable Risk

The Financial Lines are clearly definable which makes placing of partial assignments possible. However, as described at the beginning of the page Financial Lines above, many market participants – other than the Dr. Ihlas GmbH – have not yet concentrated all products insuring financial loss into one single department.

This potentially causes problems in view of communication and achievement of synergistic effects at least, if consulting with regard to more than one financial line is concerned.

Technical English

The English language is for different reasons quite important for the Financial Lines: if you look for high capacities, innovations as well as market leaders, you will figure that out quickly. If the innovations and highest capacities within the risk groups and product lines, which we focus our services on, came from Germany, we would instead of Financial Lines be talking about “Vermögensschaden-Haftpflicht- und Kosten-Deckungen für Industriekunden”.  However, it’s the US and UK market where the action is. Product names such as D&O, Employment Practices Liability, Fiduciary Liability, Initial Public Offering Insurance and Kidnapping, Ransom & Extortion Insurance and especially their abbreviations D&O, EPL, Fiduciary, IPO, KR&E have achieved acceptance in the German market. This is exactly, because these products were developed and distributed in the English language first. The German Crime Insurance also obtained in the middle of the 90th many incentives from US and UK products. As a result miscellaneous general terms and conditions were reduced to one product and improved at the same time. Only specialists with the comprehension of the leading foreign markets and knowledge of the German market are able to give comprehensive advice regarding the product groups of the Financial Lines.

Liability: Hindsight Is Easier Than Foresight

The broker’s liability is an essential motive to retain specialists. The number of publications about the topic D&O has quintupled during the past 10 years. The number of pages of the small printed general terms and conditions for the D&O insurance has risen from 2 to 17 during the last years. After the decision of the German Civil High Court (BGH 7/22/2009, file No. IV ZR 74/08) self-made broker terms and conditions could lose the consumer protection provided by the law about general terms and conditions. A preventive quality check of the policy by a second and sometimes third opinion is one of several procedures to avoid liability and increase quality.

Negotiations between Experts

It is to the advantage of the policyholder, if the Financial Lines specialists assigned by him are able to explain the risk to the insurer. Sometimes the information requests of the insurer need some improvement and questions which cannot be answered are an ongoing issue. The bigger the risk, the lower the impact will be on leading underwriters by the purchasing potential of a major customer alone. This is because only experienced lead underwriters deal with the big companies and the buying power is no news for them. It can be quite helpful, if the senior underwriter has an equal partner on your side sitting across the table.