In this day and age, acquiring D&O coverage is becoming a priority for many organisations. But when you know you need it, where can you buy it?
The world of D&O insurance can be a confusing experience for first-timers. If you’ve identified a need for directors and officers protection, but don’t know where to begin, your not the only one.
Below I outline the most effective method of acquiring a D&O policy, the importance of having a broker, and where you can find one.
It’s a sophisticated product
D&O is a form of personal liability insurance, designed specifically for the protection of directors and officers. It is purchased by an organisation on behalf of its management, and generally forms a relatively small but essential part of its overall insurance programme.
Because of its complex nature, D&O is considered to be a ‘wholesale’ class of product. Wholesale products are made available to more sophisticated buyers, and therefore shouldn’t confused with ‘retail’ insurances designed for the general public, such as automotive or household policies.
As a result, D&O is not a product you’ll ever see advertised on TV or sold through a call centre. There is a whole industry of professionals devoted to identifying and measuring the exposures of company executives, and also those who have the expertise to design and structure special insurances to protect them.
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Source coverage from an qualified broker
While some insurance companies offer D&O directly to buyers, the majority of coverage is purchased through a broker. A broker operates as an intermediary, working on behalf of their client (an organisation and its management) to advise, arrange and oversee all facets of their D&O policy.
As insurance companies and their underwriters prefer to deal with an experienced counter-party, in most instances they elect to communicate with an organisation’s broker, rather than communicating with an organisation directly.
Brokers are familiar with the D&O application process and will arrange for an organisation to submit the required proposal forms, financial records and executive profiles, in order to acquire the required coverage.
Brokers are primarily office based, where much of their communication with clients and insurers is completed via email and phone. However, when involved with larger or more difficult accounts, brokers are likely to meet both parties face to face; to better understand the risk, and negotiate terms more effectively.
How to find a broker
Insurance brokers come in all shapes and sizes, and range from one-man suburban operations, through to corporate broking and risk advisory firms, employing thousands of staff worldwide.
While all brokers have the ability to arrange D&O coverage, some brokerages have more experience than others. Organisations operating within complex industries may find benefits in dealing with a large or specialised brokerage, as they are more likely to have the expertise to advise on management risk, particularly for publicly listed companies.
When engaging a broker, an organisation should consider its own requirements and customer service expectations, as well as the capabilities of the broker.
For example, a large company with international operations may prefer a broker with global capability, and access to insurers in foreign markets. On the flip-side, a domestic business could easily be serviced by a local broker, providing a more personal touch.
Organisations that already have a broker should direct any queries to their existing account manager, who will be in the best position to advise on possible D&O solutions.
If you don’t already have a broker, you could try obtaining a recommendation from your friends or family. Or, depending on where your business is based you might consider contacting a professional association such as NIBA in Australia, BIBA in the United Kingdom, or the Independent Insurance Agents and Brokers of America in the United States.
Large, more established organisations will often follow a more formal process; tendering the management of their insurance programme our to a panel of brokers for a fixed period of time. The type of brokers involved at this level are likely to be one of the ‘internationals’, such as Marsh, Aon, Willis or Jardine Lloyd Thompson.
If after this you still don’t have any luck, try looking through the local classified or run a quick search on Google. I’d be surprised if you don’t find something before too long.