Brokers play key role in integrating risk

In today’s volatile economic and business environment, as more companies come to accept that the sustainability of their businesses is invariably linked to sound and thorough risk management policies and strategies, there is a higher demand for specialist broker skills to ensure coverage for all contingencies.

Warren Bolttler, CEO of PFP Insurance Brokers, a wholly owned subsidiary of Price Forbes in London, believes the range of risk exposure extends from legislative compliance with codes of governance such as King III to a number of socio-economic concerns like the current wave of riots and strikes being experienced in the mining and farm workers sectors.

In addition, company specific issues like the protection of cash flow from unexpected shocks and general ongoing maintenance of critical equipment and machinery all need to be addressed as part of an overall risk management strategy. Bolttler says placement of an insurance portfolio is just one strategy in a range of strategies.

Risk managers know too well that a number of the key risks that an organisation faces are ‘uninsurable’ in terms of traditional insurance portfolios. ‘Wear and Tear’ is a classic example. Slow, gradual corrosion of bolts on a conveyor structure could result in the collapse of a structure and long term and devastating interruption to the business. However, ‘corrosion’ is not covered in terms of a traditional insurance policy. Therefore, instead of transferring the risk via a broker to an insurance company, the risk will have to be managed in-house, via a maintenance programme.

“Therefore when designing an overall risk management strategy, risk managers and brokers alike need to ensure that the insurance portfolio dovetails with all other in-house risk management strategies,” says Bolttler.

Bolttler says the brokers’ role in this is to unite the client with the insurance market, and to place a portfolio of insurance that is cost-effective, but more importantly, a portfolio that dovetails sufficiently with a company’s other risk management strategies to ensure a holistic approach to risk management.

He says the South African insurance market is relatively sophisticated and brokers generally are very good at delivering the necessary advisory service to clients.

“However,” says Bolttler, “what distinguishes a good brokerage from a truly excellent one, is the element of personal, bespoke service.”

He notes that in this regard there has been a trend towards the creation of ‘super-brokerages’ following a number of mergers that have recently taken place in the market. While large organisations bring with them a wealth of knowledge and experience, they sometimes struggle with appropriate client service delivery. By their very nature large companies need to stream-line, and create conformity in order to be efficient.

“The product that a client ultimately receives is driven by what the firm can efficiently deliver and not necessarily by what the client’s specific needs are. So instead of risk management informing the insurance portfolio, the insurance portfolio often gets placed without much consideration of how well it fits into the holistic approach,” he says.

It is this differential that sets the mid-sized bespoke agencies apart.“Recognising that every client is different, every risk is different and treating every programme as a one-off has become essential in the current volatile environment. Insurance placed must form part of an overall risk management function and not driven simply by what the firm is able to deliver efficiently,” concludes Bottler.


Prepared on behalf of PFP Insurance Brokers by Cathy Findley Public Relations