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GAZETTE
SEPTEMBER 1989
Insurance Consultancy
and Risk Management
The role of the Insurance Con-
sultant may best be considered
under the following headings:
1. Consultation regarding cover.
2. Risk Management.
3. Consultation regarding claims.
No one would hand over the keys
of their home, shop, or factory to
the first one who comes along and
offers to look after it, for the
cheapest price. First of all, he would
need to know a great deal more
about the offerer - his integrity,
expertise and qualifications for the
job. Yet, every day, people hand
over responsibility for their assets,
sometimes running into millions of
pounds, to Brokers or Insurance
Companies w i t h t he lowest
quotations. The true value of
insurance cover is only known
when the claim arises. With most
commodities you get what you pay
for - that does not necessarily
apply to insurance where you may
not get what you thought you paid
for. The vital rule when buying
insurance is -
If the cover is not
edequete - the price does not
metter.
Eighty percent of commercial
insurances in this country are
arranged by insurance brokers.
Many of these firms, particularly
those who are members of the
Corporation of Insurance Brokers of
Ireland or the National Insurance
Brokers Association, are highly
reputable and provide an efficient
service. Member f i rms must
maintain professional indemnity
insurance and produce Solvency
Certificates each year. Until the
legislation currently before the
Oireachtas is passed, there is
nothing to stop anyone describing
himself as an insurance broker. No
professional indemnity insurance is
necessary, no level of expertise
required and, very often, little to be
had. If the current Bill passes
through the Oireachtas in its
present form, many of these firms
may be forced to become agents,
from whom a relatively low level of
expertise will be required.
A policyholder wishing to obtain
a second opinion may engage the
services of a consultant who will:-
1. Examine all existing insurance
contracts and visit all premises
concerned.
2. Seek any additional information
necessary e.g. the value of
stocks at risk.
by
PEARSE KILCULLEN*
3. Advise on the scope of cover
he considers the policyholder
should have.
4. Identify present inadequacies
in cover.
5. Suggest that professional re-
instatement valuations for
buildings be obtained and
updated annually.
6. If thought necessary, recom-
mend different insurers.
7. If thought necessary, recom-
mend change of brokers.
8. Examine the circumstances
leading up to the contract to try
to identify and rectify any
possible lack of disclosure
which could give rise to serious
problems at the claims stage.
9. Identify material risk alterations
not advised to insurers -
rectify the contractual position
and alert the policyholder for
the future.
10. Examine the possibility of
losses arising due to computers
being accessed by unauthor-
ised persons.
11. Suggest ways in which cover
may be arranged for new kinds
of losses. If the policyholder is
one who makes or supplies a
product that can be consumed,
inhaled or applied to the skin -
he may be advised to arrange
Malicious Product Tamper
insurance. This new form of
cover has been designed to
indemnify a manufacturer for
the cost of recalling a product,
including inventory destruction,
lost profits, business inter-
ruption, product rehabilitation
and consequential loss. The
recall of
Tylenol Extra Strength
in the U.S. in 1982, after
contamination resulting in
seven deaths, cost US$100m,
with loss of sales amounting to
US$400m. The significant
thing about this loss was the
fact that the Courts held that
the cost of recall or sales losses
did not fall within the scope of
the Products Liability policy in
force.
The consultant will not advise on
price - that is the broker's job. He
will recommend that all insurances
be placed by reputable brokers.
Risk Management
In a large commercial concern the
cost of claims controls the cost of
insurance. In recent years we have
seen some Employers' and Public
Liability premiums increase tenfold
in one year - an enormous burden
for industry, particularly, if com-
peting overseas. This has led to the
growth of Risk Management which
is the art of working with manage-
ment to protect company assets
and control or eliminate losses. It is
relatively new in this country and
only of interest to the larger
industrial concerns.
The consultant would seek to
introduce the f o l l ow i ng pro-
cedures:-
1. A major disaster plan.
2. A planned programme of
accident/fire prevention under
*Managing Director of J. P.
Kilcullen & Co. Ltd., Insurance
Consultants and Risk Managers,
Blackrock, Co. Dublin.
245