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Top risk management tips for insurance brokers

There are many factors for insurance brokers to considerwhen improving risk management within their firm but here are some keysuggestions for reducing your exposure to professional

indemnity claims.

1. Regulation, regulation, regulation. Ensure that you areaware of, and comply with, all of your regulatory requirements when conductingbusiness.

2. Ensure you ask enough questions to really understand whatyour customer is asking for and what insurance cover they need to consider. Ifyou think there are covers that the customer should consider, suggest them.

3. Ensure that you have a clear understanding of what yourcustomer does, how they do it, where they do it and who they do it for; this isparticularly important for commercial customers. If you think something couldbe material, ask about it, don’t just act on what you’re told.

4. After your demands and needs assessment ensure that anappropriate demands and needs statement has been issued. This document is avital part of the process of ensuring that you and your customer understand howand why they’re purchasing an appropriate product.

5. If you have a binding/underwriting authority do notdeviate from the terms of that authority. Breaching a binding authority couldresult in an extremely expensive claim.

6. Ensure that the customer knows what cover they’re buyingand what cover they are not. Explain the key elements of cover and provideclear details of any onerous or unusual policy terms.

7. Ensure that cover is both adequate and appropriate forthe needs of a client. Is the sum insured adequate? Has all materialinformation been disclosed to insurers?

8. Keep clear notes of all key meetings and conversations.If a client rings to advise of any change in their circumstances, make a noteof it. Many claims arise out of a failure to keep accurate records.

9. Keep up to date with trends and developments in your areaof expertise.

10. Don’t advise on subjects you are not familiar with. If aclient is enquiring about a type of cover which doesn’t fall within your areaof expertise then seek assistance.

11. Carry out regular file audits and peer reviews. Thiswill help to ensure that all staff are following correct procedures and thatthere is consistency in the approach being taken.

12. Ensure that there are adequate financial controls inplace.

13. Have a clear procedure for dealing with conflicts ofinterest.

14. Have clearly defined IT and document managementpolicies. Ask yourself: Do I have adequate security measures in place? Is therean internet use policy? And are electronic files and memory sticks secured fromunauthorised access?

15. Know your professional indemnity policy. It issurprising how many insurance brokers don’t. Be aware of your claims reportingobligations under the policy and make sure all staff are aware of their duty toreport potential claims and circumstances which may give rise to a claim.

16. Ensure that the activities you carry out are covered byyour professional indemnity policy. If you are engaging in different areas ofbusiness (eg providing financial advice) or dealing with clients in foreignjurisdictions make sure that your professional indemnity policy will respond ifa claim is made against you.

Finally, it is worth emphasising how important good riskmanagement is. Dealing with a professional indemnity claim can be costly andtime consuming and most insurers will require you to be actively involved inthe process.

If a claim goes to mediation or trial you could be lookingat hundreds of working hours being lost, not to mention the loss of a clientand the potential damage to your reputation; and in this economic climate thatis not an appealing prospect.

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