FAQ
Q. Don’t all insurance professionals consult or offer professional advice?
A. When comparing independent advisors with agents or brokers, you need to consider their perspective and objectivity. Independent risk management advisors, like McElroy, do not sell insurance. They are not affiliated or remunerated by firms or individuals that do sell insurance. Independent advisors are paid by their clients and never receive a commission. The potential gain or loss of commission income never enters into their decision-making process thereby eliminating any potential conflict of interest.
Q. Can’t insurance agents or brokers provide the same services as an independent advisor?
A. Agents and brokers may tell you that they engage in consulting services and may like you to think that they can provide the same objective advice as independent risk management consultants, but they can’t. There is no way for an agent/broker to independently advise you on what insurance to buy or not buy, when they are compensated by selling you insurance products. The primary business activity of all agents/brokers is insurance sales.
Q. We’ve used the same brokerage firm for years and would prefer to engage them for some consulting projects. Is there any reason why we shouldn’t?
A. Reports and recommendations from agents/brokers may be viewed with some degree of skepticism if those individuals are perceived as having something to gain from their recommendations. Agents and brokers retained for consulting-type projects have ample opportunities to gain “inside information” that can prove invaluable at some point when they decide to solicit your insurance business.
Some projects, such as the handling of a competitive bidding process, can produce less than optimum results if handled by a broker. Other agents and brokers may be reluctant to participate or offer their best proposal if they suspect that their proposal will receive anything but the fairest consideration. Using an independent risk management advisor ensures objectivity and fairness.
Q. We already pay substantial premiums for our insurance programs. By engaging an advisor to conduct an RFP process, might we expect to partially recover the advisory fees by way of a combination of reduction in premiums and/or broker remuneration?
A. Absolutely. An advisor’s goal is to put the control of the overall insurance spend in our clients’ hands. You should expect to pay for what you need, want, and value in the insurance products and services purchased.
Q. Our insurance broker is remunerated through commissions on the insurance we purchase. How is a risk advisor compensated?
A. We feel that an equitable method of compensation for our risk advisory services is on a fee for service. We can be engaged on a project basis, annual retainer, or hourly basis. Our goal is for our client partners to derive value from our engagement.
