Brokers must not treat risk management as an ‘afterthought’

Risk management has climbed the corporate agenda and brokers are fast finding themselves facing increasing demands from clients for support and advice on how to make risk management a strategic focus.

This topic has become even more pertinent following the onset of the hard market and the Covid-19 pandemic – both events have tested business continuity plans and brought about new, unprecedented risks that businesses have been scratching their heads over.

Risk management, however, has always been an important part of a good broker’s role – although maybe a less prominent requirement during soft market conditions, according to Richard Graham, Aston Lark’s head of claims and risk management.

Navigating a hard market

He said: “In a soft market, everyone can place a risk. In a hard market, it’s only those brokers that have not just jumped on the ‘risk management boat’ last minute and have been talking to their clients about the importance of managing risk all year-round that are able to truly succeed.

“In a hard market, insurers want to focus on the catastrophic risks and want comfort and reassurance on a wide ranging list, from fire to continuity, to safety.

“An early and constant approach to risk management from a broker will achieve this and consequently enable them to attract the best terms.”

Neil Hodgson, managing director of risk management at Gallagher, added that the hard market has changed the way corporate clients think about risk management.

“The pandemic has seen companies look to their business continuity plans and many believe that while they have had plans in place, they can do better,” he explained.

“Casualty risks are rising due to increased health and safety regulation and we have seen a greater focus in the need to secure a company’s supply chain.

“It has led to more conversations with brokers around risk management. Companies are more open to discussing the issues, which has to be a positive.”

He added that although “risk management has long been seen as an afterthought”, it should - in fact - “be the first part of the insurance conversation”.

Hodgson continued: “When you have managed the risk, then you are able to understand what needs to be mitigated with insurance. For too long, some brokers have turned that equation around.”

Insurers are also keen that brokers engage in greater levels of risk management.

“There’s always been brokers in the UK that take the risk management of their clients really seriously,” said Nic Brown, broker divisional director at Markel UK. “And obviously, that’s their role.”