Risk managers consider alternatives to traditional in-house broker model

Some experts believe that risk management thrives best when outside out of procurement because they fear that untrained staff will assume the responsibility of organising insurance cover. Others are convinced that business units can only benefit from giving up their own risk management department and switching it into the purchasing unit–such as occurred at ÖBB. A year ago, ÖBB integrated its in-house broker into the company’s purchasing department. “The company used to pay a service fee. It was difficult for our management board to accept this and led to permanent discussions about whether a certain amount of money was justified or not,” Mr Köhler explained. “This was very tedious.”hideSo the management board decided to give up the in-house broker with its three employees—Mr Köhler, his colleague Peter Werner Kunz and another employee responsible for administration. Like all other departments they now receive a monthly lump sum, in their case for insurance and risk management. “This sum is absolutely sufficient,” said Mr Köhler. He believes that his job has become more important since ÖBB changed its structure. “The management always used to be sceptical about whether a certain fee is justified or not,” he said. “Now these days are gone.” Knowing both systems Mr Köhler admits that in the new model price is one of the main factors in the tender process. “Our tenders at ÖBB are strictly price-oriented,” he said. Before bringing insurance offers before the management board, all have to be comparable in terms of the sum insured and the price. “As a state-owned company we are under great price pressure,” he said. “Generally speaking, when I achieve an acceptable price I can assume that the performance of every insurance company is the same. Other factors play only a subordinated role.” He emphasised that the content of his work has not changed. “We are still in close contact with the management board. The staff in the insurance department has not changed, there are no untrained employees. And we rarely have contact with our colleagues in the purchasing department, you can hardly compare the areas of competences.” As the comparability of insurance offers is especially important for his company, he expects Inex24 to become more important for ÖBB in the future. The company is an Austrian pilot partner of the controversial online placing platform that wants to start tendering at the beginning of 2013. “Inex24 helps us to get non-binding comparable price offers from different insurers,” the risk manager said. “But the traditional mode of a cooperation based on trust, to keep in touch with the insurer in meetings and phone calls and to trust one another, will not disappear.” Axel Theis, Chief Executive of Allianz Global Corporate & Specialty (AGCS), disagrees that moving risk managers into the purchasing department will be beneficial to the profession. “Risk managers can only keep a strong position in the placement process when they have a holistic view on the company’s risk situation,” he said. Risk managers would lose their strategic importance if shoved into the purchasing department, he argued. He believes that with this model only price counts, at the expense of the quality of cover and the risk manager’s position in the company. “The buyer gets an order,” he said. “He buys insurance as his colleagues buy pencils, office furniture and software. At the end of the day it is all about costs.”

Risk managers consider alternatives to traditional in-house broker model

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