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The Role of the Commercial Insurance Broker

Business come in all sizes, and the role of the Commercial Insurance Broker will vary in some respects with the size of the client company and the amount of insurance expertise it has available among its own staff.

The approach to commercial insurance of a small engineering workshop in a side-street will not be the same as that of a huge multi-national corporation which may number an insurance company among its subsidiaries. The essentials of the broker’s task will be the same, however, for the largest company as it is for the individual: to use his knowledge of insurance and of the insurance market to help his client to arrange a sound insurance programme which, to the maximum extent possible, meets the client’s particular needs.

The Business Insurance Broker will handle the insurances of a small company in a manner very similar to those of an individual. The relationship is likely to be a personal one wit the directors of the business, and they can be considered, in a way, as individuals who have a different, and more extended, set of insurance needs because of their involvement with the company.

The first essential will be for the insurance broker to ensure that his clients have the compulsory commercial insurances which they need for their business to be carried on legally.

Employer’s liability cover to protect the workforce must be arranged, and motor insurance is also likely to be a necessity. If the business has plant or machinery which must have a periodical statutory inspection, it will be usual to arrange for this to be done by a specialist engineering insurer under the terms of an engineering inspection contract, with or without insurance.

Fire insurance will be very important, as will consequential loss insurance to protect the firm against loss of earnings during the period following a fire until it is fully back in business. Then there will be all the other insurances which a business needs – public and products liability, theft and money insurance, goods in transit and perhaps marine insurance, all-risks covers, fidelity guarantee and possibly others. The broker may also be asked to provide insurance covers for staff, a group life and pensions scheme, or personal accident or permanent health insurance for example.

The range of insurance which may be needed, and the variety of problems which may be associated with them, place great demands on the broker with an industrial firm as his client, and make it much less possible for him to be a specialist in one or two types of insurance only. The individual may be happy to consult a broker for life or motor insurance only, but the industrial company is likely to want a single source of advice for all its insurance problems.

The larger the client company is, the less it will be interested in buying standardised commercial insurance covers or packages designed for small business insurance, and the more it will want policies which match its own specific needs. This calls for a very deep understanding of the client’s business on the part of the broker, matched by creativity in designing insurance solutions to the problems posed. The Commercial Insurance Broker’s negotiating skills may also be called upon to persuade an insurer to accept what may be an entirely new approach to a particular insurance need.

The problems of a small spread of risk may be overcome because the company is large enough to be rated on its own past record rather than as a member of a trade which is rated as a class in an SME business insurance package. When it reaches this size, a company may be interested in extensive self-insurance, and these days it is part of the broker’s role to help such clients develop appropriate self-insurance plans and to advise on risk management measures to ensure that the risk that is being retained is reduced as far as is economically possible.

The Healthcare Solution

I think everyone would agree that lowering healthcare costs is a really cool idea. Before we ask (or allow) the government to take over the entire industry, we may want to look at it little closer.

There are two questions we should ask before taking the governmental leap: What are the real costs…to us? And, is there a better solution? After boring you with some statistics, I plan on offering you my version of a solution.

By showing you these stats, I hope you will gain a better idea of what the healthcare industry means to our overall economy. When I say economy, I am not just referring to Wall Street or corporate profits… I am referring to your pockets and paychecks

The Stats:

According to the US department of labor’s Bureau of Statistics, the Healthcare industry is the largest industry in the land. As of 2006, the industry accounted for over 14 million jobs. In addition, 7 of the 20 fastest growing occupations fall under its umbrella. 5% of the total US population works for some form of medical care facility. As we say in the south, “That’s a heap o’ folks.”

These stats do not include sub-industries like pharmaceutical companies, insurance companies, insurance agencies, and medical paraphernalia manufacturers. Millions of others rely on these sub-industries for their paychecks. If we add these jobs into our stats, we’re probably closer to 10% of the total population relying on the healthcare industry for their bread and butter. That’s almost 30 million jobs.

Keep in mind that Corporations aren’t the only ones who profit from the industry. Your friends, your family, your wives, your fellow church members, and your neighbors may be getting their paychecks from healthcare. Those of us who aren’t have 401(k)’s, IRA’s, mutual funds, and other investments tied to medicine and its auxiliaries. In other words, we all have a vested interest and should want healthcare to be efficient, profitable and long lived.

In summary (if it’s not too late), healthcare is a huge pillar of our economic foundation. It is almost completely domestic and for the most part, can never be shipped overseas. It effects every man, woman, and child in this land? As a result, we have to use extreme caution when considering a change to its structure.

Unforeseen costs:

Now that we are in a cautious mindset, let’s examine what a government take-over might mean. I think we all can agree that government is not the poster child for efficiency. As a matter of fact, the words “government” and “efficiency” are rarely spoken with a straight face, but given the seriousness of this topic, we really can’t afford to be laughing at that old joke.

In all reality, a magic wand of hope is not going to change how our government functions. The bureaucracy is in place, so allowing them to take over the industry is not going to magically make healthcare more efficient and less expensive. Sadly, the opposite is probably its destiny.

From our standpoint, it often seems that government has infinitely deep pockets, but their pockets really have big holes in them that lead to our pockets. If they take over the largest industry in the country, how much extra will we have to forfeit from our paychecks to pay for it? Not only will we be sharing everyone else’s healthcare costs, but the government has no incentive to be efficient. In addition, how much money will be removed from the tax pool as a result of converting a for-profit industry into a governmental non-profit? In all reality, that’s what we would be doing by socializing healthcare.

How efficient will it be? And, how long will our children have to wait before they get treated by their care provider? If we ask government to step in, it may incur a lot more pain than is actually relieved (pun definitely intended).

So What?

At this point, I know I am at risk of losing your attention. Please hang with me as I offer you my solution.

Health Insurer’s Marketing Overhaul:

Woo Hoo! Government still gets to be involved: Initially, government needs to pass legislation that forces health insurers to market directly to you and I. Yep, you read that correctly: No more group insurance plans that allow insurers to create mini-monopolies within corporations. They will be forced to compete in the open market for your insurance dollars and can no longer hide their premiums in your paycheck withholdings.

Health insurance companies, like the government, have found nifty ways to hide the true cost of their products by having your employer share those costs, and even collect it for them. They get their money before you receive a paycheck, and as a result, you don’t even miss it.

Since employers do lose some tax advantages in this proposal, I suggest we allow them to convert those tax advantages to an increase in your pay-scale. Both of these suggested changes would create additional jobs and higher salaries.

By creating a more competitive environment, insurers are forced to keep premiums in check, and you get more money in your paycheck. So far, So good…right?

Malpractice Suits:

Here is the most controversial part of my plan: We must limit the amount courts can award for malpractice suits. Medical malpractice insurance premiums and potential/actual legal costs are two of the biggest expenditures in healthcare. The doctors and hospitals spend millions and billions of dollars worrying about being and getting sued. As a result, they are forced to pass these costs on to us and the insurers.

If we want doctors and hospitals to lower their costs, we have to be ready to assist them in lowering what it costs them to stay in business. By segmenting malpractice awards into two categories (death and disability) and limiting the amounts that can be awarded under each category, we can assist them in lowering those costs. In turn, we lower our costs.

The dilemma, however, is how to place a dollar figure on someone’s life or ability to normally function. What is fair? What is equitable? I find myself unable to draw a clear conclusion, but we already established that caution was a necessary component to change our healthcare system. This is one area that requires extreme sensitivity, thought, and patience…

The conclusion…finally:

On the whole, there are still a few details to iron out before we embark on any of my proposed changes, but I challenge you to give it some thought. It makes sense and it works within our current economic system without creating a major upheaval in our daily lives. It puts more money in our pockets and keeps the government out of them. (Like most struggling people, I am all in favor of both).

Feel free to let me know your thoughts on this…my contact info is below.