Selecting the Right Broker: A Template

Monday, January 3, 2005 | 0

The key to a productive, profitable broker/client relationship is matching your needs and wants with a brokers' services and style. This process is going to take some work. You will need to conduct, in effect, job interviews with prospective brokers.

By Brent Heurter

A proactive broker is the employer's partner in reducing costs. If a prospective broker cannot tell you specifically how they will reduce your costs other than through marketing of your insurance program, keep looking.

Your ultimate goal is to find a brokerage that will invest time and resources in order to secure your business. In many ways, you are interviewing a business partner when you look for a workers' compensation consultant. The broker becomes a gatekeeper, helping you find and schedule the services you need to control your workers' compensation costs. A broker that has strong, stable relationships with its carriers will be able to negotiate a better deal for you, or even find coverage for you in a tight workers' compensation market.

During this process, brokers will be finding out as much about you as you are about them. In order to serve you, your broker needs to understand what types of services your company will benefit from. You will be laying your cards on the table-and a broker that is not interested in meeting your high expectations can recuse itself from the process.

The first step is to come up with a list of possible workers' compensation insurance brokers. Then you need to narrow them down, and finally choose the best one for your situation.

You will need to interview the brokers as carefully as you would interview a potential candidate for COO or CEO. You can do this by mail, telephone, or face-to-face. Each approach has drawbacks and benefits.

To save time and ensure consistency, I recommend using the mail to narrow down your list to the top two or three candidates, who you can then interview in person or by telephone. Whatever you decide, be consistent with what you ask. The following template, which you can adapt as necessary for your organization, will work as a letter or as an introduction to a telephone call.

[YOUR LETTERHEAD]

[DATE]

{NAME, ADDRESS, AND CONTACT INFORMATION OF BROKERAGE]

Dear [NAME OF PROSPECTIVE BROKER]:

[COMPANY NAME] is selecting a brokerage to handle our workers' compensation insurance needs. We are currently contacting brokerages in order to find the one that is best able to handle our company's unique needs. Our preliminary research has identified your firm as one of several top workers' compensation brokerages. With this letter, we invite you to participate in our search process.

As an organization, we are deeply committed to controlling our workers' compensation costs. Our search process is designed to help us find a broker that will partner with us in that vital task. We believe that the broker we hire will be a key player in our organization's long-term success and in our employees' health and welfare.

To help you understand what we do and our company's needs, we have attached a fact sheet of key company statistics, including our workers' compensation rating information and loss history.

We have developed the attached form for use in our search process. All brokers interested in pursuing a relationship must fill out this form. The forms will be evaluated by the search committee. Please return this form by [DUE DATE] to Workers' Compensation Insurance Search Committee, [COMPANY NAME AND MAILING ADDRESS] or fax no later than 4 p.m. to [YOUR COMPANY FAX NUMBER].

This is the first step in our search process. We are hopeful that, through this process, we will find a brokerage that will be able to partner with us to ensure the health, safety, and security of our employees. Please do not hesitate to contact me with any questions. I look forward to reviewing your completed form.

Sincerely,

[COMPANY NAME AND LOGO]
Key Company Statistics

Company Information
* Type of company
* Brief description of company's primary products and/or services
* Company's mission statement
* Locations
* Number of employees
* Annual sales
* Include the company's annual report, relevant marketing materials, Web site information<.i>

Workers' Compensation Information
* Current carrier
* Current funding type
* Workers' comp renewal date
* Workers' comp annual cost
* Experience modification factor
* Payroll amount
* Classification codes
* Unit statistical filing date
* Results of recent claims reviews
* Percentage change in premium over the last three years
* Information on workers' compensation claims for the past 12 months, including number, type, costs, days lost time, time to resolution, litigation

[COMPANY NAME AND LOGO]
Workers' Compensation Insurance Brokerage Information Form Please provide the following information and return your responses to:
Workers' Compensation Insurance Search Committee
[COMPANY NAME AND MAILING ADDRESS]
[YOUR COMPANY FAX NUMBER].
Due date: [ ]

Contact Information
* Company name, address, contact information
* Name and contact information for the person completing the form

Company Information
* Number of years in operation
* Number of employees
* Number of agents
* Corporate mission statement: please provide copy<.i>
* Ownership structure
* Organizational structure: please provide relevant organizational chart
* Service team structure
* Qualifications and expertise of key corporate personnel
* Competitive advantages you provide
* Please attach a list of the insurer carriers you represent and your premium volume with each.

Client Base Information
* Industries represented by key clients
* Average length of time clients are with your brokerage
* Please list your experience with the each of the following alternative funding arrangements:
-- Professional employer organizations (PEOs)
-- Self insurance
-- Group self insurance
-- Retro plans
-- Large deductible plans
-- Small deductible plans
-- Captives insurance arrangements
-- Pools
-- Plans offered in other states

Servicing Information
* Who will be the most likely individuals on our account team?
* Qualifications and expertise of potential account team members
* How much access will we have to these team members?
* How will you guarantee continuity between your account team and our staff?
* How will our account will be handled, from the first day through daily, monthly, quarterly, and semi-annual, and annual landmarks?
* How will a typical workers' compensation claim be handled? Please be very specific.
* What outside individuals/clinics/experts do you maintain relationships with?
* How do you stay abreast of changes in the [STATE] workers' compensation insurance market?
* What specific measures will you take to reduce our workers' compensation premium costs?
* How often do you do conduct premium audits? Please describe what actions you take based on the results of the audits.
* How often do you review loss runs? Please describe what actions you take based on the results of the loss runs.
* How often do you review reserves? Please describe what actions you take based on the results of the reserve reviews.
* What technology do you use to service accounts, track claims, communicate with the marketplace, etc.?
* What claims prevention resources are available from your organization in each of the following areas:
-- Federal OSHA compliance
-- State OSHA compliance, if applicable
-- Workplace safety training resources
-- Workplace safety audits
-- Background checks on job applicants
-- Integrated absence management
-- Employee, supervisor, and management training on workers' compensation
* What claims prevention resources are available from your organization in each of the following areas:
-- Accident reporting
-- Analysis and management of claims over a certain threshold. Please describe the threshold and what form your intervention takes.
-- Injury care coordination
-- Workers' compensation fraud investigation
-- Return-to-work programs
-- Medical care networks. Please include information on discounts.

Fees and Guarantees
* Describe the fee and commission structure with your insurance carriers.
* Do you have a contingent commission arrangement based on volume with any of these carriers? Please explain.
* Will you guarantee that you will reduce our workers' compensation costs? What type of guarantee will you provide?

References
* Please provide five references of firms you service that are close in type, size, and annual revenue to our organization.

Brent Heurter is founder and chief solutions officer of ClearComp (www.clearcomp.com). For more information, call 1-888-CLEAR-89.

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The views and opinions expressed by the author are not necessarily those of workcompcentral.com, its editors or management.