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  1. 1. JANUS Risk Solutions COMPETITION & Your Insurance Program Is it being utilized to the fullest? Risk Management Consulting
  2. 2. Many times a business owner or CFO says “My broker solicits quotes from JANUS multiple insurance carriers…” – this is not true competition. Risk Solutions This is like going to a car dealership; believing you got the best deal because they sell more than one type of car and you had options. At the end of the day the only thing a salesman cares about is that you bought from them. An educated consumer does their research and becomes knowledgeable about the product then takes that knowledge and creates competition. When we assist our clients in managing their insurance marketing process we typically find ways to save on average 33% of their premiums. That is significant. It’s time to find out how we accomplish this successful Return on Investment! Risk Management Consulting
  3. 3. JANUS Risk Solutions It sounds so simple but many companies do not employ competition when procuring insurance. Why is that -- when businesses around the world are subject to competition daily? It’s not personal it’s business … well is it? Don’t become a prisoner of an We understand that a relationship is valuable but you archaic way of should still understand that cost. doing business. The nature of the insurance product is adverse to There is a better competition thus a company must become an educated way…. consumer and force competition. Risk Management Consulting
  4. 4. JANUS What have the leading brokers been saying? Risk Solutions CEOs from the world's largest insurance brokerages have some interesting and divergent views on the subject. •“… people just don't really understand … your profit as a broker or an agent, it drives behavior and it drives behavior in a way that is adverse to what your clients are paying you to do,” said Don Bailey, CEO of Willis North America... •“It makes no sense to me to be able to give volumes of business to insurers just because you get paid for it and it may not be in the best interest of the client. Legally they say that's good, principally and from a value proposition it can't be negotiable,” said Joe Plumeri, CEO of Willis Group Holdings... Brokers walk this walk many •“I believe that if you as a buyer and myself as a seller agree that appropriate compensation can come in the form of a commission, a fee, a contingent and times… supplemental, that's an adult conversation that's appropriate,” said J. Patrick Gallagher, chairman, president and CEO of Arthur J. Gallagher & Co... It comes and goes •“It's never a bad idea for our clients to know what we earn,” said John in the news but Lumelleau, president and CEO of Kansas City, Mo.-based Lockton Cos... “... We don't believe that there is anything even remotely related to a disservice to the business our client base,” by accepting contingent commissions. “If there were, we quite frankly believe we would have seen that in our results.” never changes. •“I don't think contingent commissions are the litmus test for whether the broker has a conflict of interest or not. All insurer carrier revenue streams…have the potential of creating a conflict of interest,” said Dan Glaser, chairman and CEO of Marsh Inc... Risk Management Consulting
  5. 5. So what does all this mean? JANUS Why is the insurance product adverse to competition? Risk Solutions Consumer frequently do not shop their insurance; placing their fate in the hands of a single agent/broker as their sole source of information. Forget about all the talk on Contingency Commission  Steering Commission – kickbacks to win insurance contracts  Profit Sharing – Based Commission – resulting from claims/losses presented to insurers This is just a show to keep you in the dark. Contingent Commission really do not matter if you are utilizing True Competition. Risk Management Consulting
  6. 6. Why is the insurance product adverse to competition TWO MAIN REASONS!!!! JANUS Risk Solutions 1. Broker - Carrier Relationship Brokers have contractual relationships with insurance carriers (Many times hundreds of relationships) based on: 1) Profit Sharing - Loss Ratio With so many contractual relationships they can’t all be their number 1 provider. What may be number 25 for some maybe 2) Premium Revenue number 1 for another. 3) Volume of Business 4) Insurance Carriers like any other business are profit driven; they have geographic profit center that different brokers access and have to meet quarterly earnings. 2. Nature of the Business causes an inherent disadvantage when it comes to competition. 1) Complexity of the product. (Legal Document) 2) Financial soundness and quality of claim service unknown before a claim is ever reported. 3) Insurance Carriers are legally allowed to employ anti-competitive practices 4) Pricing and Underwriting is individualized for both consumer and carrier. (Each carrier views the risk differently) 5) Insurance Carriers many times decides to get “in and out” of particular business segments. 6) Comparison shopping is difficult unless you understand the product How many horses do you have on the track? A horse doesn’t run it’s best time running alone. Risk Management Consulting
  7. 7. So what does all this mean? JANUS Transparency doesn’t change the nature of business Risk Solutions  How many carrier relationships can they truly represent?  Misleading advertising – Brokers state they work for the consumer but how can they serve two masters. Which one ultimately pays more money – where’s the incentive?  Insurance brokers are essential tools for businesses but not your only tool in the tool box. This is not to say your current broker is doing a bad job but they are influenced When trust is absence, by personal and business decisions. suspension rules… The time and effort to Aren’t we all … it is human nature. investigate your cost structure and prepare a solicitation will Just understand the relationship cost. help you get better control over the risk factors that result in higher-than-necessary The consequence of not utilizing True Competition insurance cost and drive the price of insurance premiums.  Lack of Claim advocacy  Not 100% sure of what you are buying --Don’t buy a list of exclusions  Naturally result in overcharges Risk Management Consulting
  8. 8. JANUS Key Elements of our unique consulting approach and how they benefit your company Risk Solutions • Establish Benchmarks. Our experience is based on the multitude of everyday practical business experiences spanning from every type of market scenario. We are equipped with a combination of current market understanding and deep industry knowledge thus for each client engagement we have the ability to establish benchmarks to evaluate insurance and offers from a variety of brokers and insurers. • Careful Evaluation. We carefully evaluate all bids, and given our experience, we are able to recognize a quality offer at the right price vs. one that is not as favorable. • Negotiations/Results-Driven. Our negotiation process is critical in achieving the strategic goals set forth by your company’s management. We advise on how to best respond to industry questions, interpret the value of recommendations and we make certain that the proposals being set forth are receiving the highest priority at the brokerage and insurance company level. We are not brokers; we do • Accomplishment. The proof of our capabilities is in our bottom-line results. Our not sell insurance services have consistently helped client companies to achieve insurance premium nor represent savings averaging 30%-50%. insurance Further, we consistently deliver a significant ROI to our clients on the consulting carriers. fees they pay us. Over the long term the ROI recognized can be 10-to-1: That is, the companies have saved a total of $10.00 for every $1.00 they have paid us in consulting fees. Premium savings have created new value for many companies: If you were to invest that money back into your business what would the return on that investment be? I would bet that the initial investment over time could produce a meaningful ROI for your business, especially if you continued to realize those savings year after year. Risk Management Consulting
  9. 9. Learn more about JANUS Independence, Technical Skills and Competition Risk Solutions Janus Risk Solutions is a fee based risk management consulting firm that works only for you and derives no income from either brokers or insurance carriers. As risk management professionals, Janus Risk Solutions brings to the table technical skills that enhance the risk management process, proper competition, independence and uncomplicated advice. We serve clients ranging in size from middle market to very large multinational corporations—in a wide range of industries and locations.  A Broker should stand or fall on their own merits and performance. Understanding relationship cost should be in the decision process.  Purchase of insurance is complex – utilize assistance in soliciting and evaluating competitive bids.  Help lower your cost.  Know that you have the ability for the most favorable selection process free of bias or favoritism. Please Contact: James King Janus Risk Solutions, Inc. (P) 551-427-7427 Risk Management Consulting