As a third-generation insurance professional, Bill Baker (pictured), Gallagher’s head of sales, US brokerage, has seen the industry transform in a multitude of ways, including the role of the broker. Gone are the days of simpler claims, strict lines of coverage and alarmingly scarce capacity – and, as such, new broker responsibilities have come to the fore.
“Brokers need to take on some stress on behalf of our clients,” Baker said. “We need to do this by being right on the front lines, being very knowledgeable about all forms of coverage with all the connections we have and parlay that information in a very transparent way.”
During a sit-down interview at RIMS 2023 in Atlanta, Baker spoke with Insurance Business about how the industry and broker profession has developed since the restrictive markets of the 1980s and why cyber coverage is indicative of a strong collaborative ethos.
With a decades-long career in insurance, Baker has witnessed varying degrees of success and hardship within the industry. However, the hard market of the mid-1980s was particularly memorable as an exercise in resilience and ingenuity.
“Between 1985 and 1987 was definitely the hardest market in my lifetime,” Baker said. “Capacity got extremely low, which was quite troublesome because even in similar scenarios, there was always capacity that got replenished rather quickly.”
While today’s market may be restricted in certain areas, it has yet to dip into dangerously low availability, which, in part, is due to an augmentation of coverage options.
“The main difference between the 1980s and now is how coverages have evolved,” said Baker. “Back then, there was no such thing as employment practices or cyber liability, and even D&O risk was not as severe.”
Claims have steadily progressed over the past 40 years, which has necessitated an evolution of the insurance marketplace as well.
“We’re at a much more litigious stage in society, which is driving the importance of sweeping yet targeted coverage to best safeguard a business in lieu of any potential legal dispute,” said Baker.
In a more positive light, the extremely rigid state of the 1980s marketplace also helped create a greater abundance of options to suit specific needs.
“The 1980s was a turning point,” Baker said. “People were panicking because they wanted to buy a certain limit for a policy but couldn’t. This created a desire to buy more coverage, such as D&O, or having higher umbrella coverage.”
Having experienced varying degrees of industry-wide triumphs, setbacks and everything in between, Baker has witnessed something of an evolution with the role of a broker.
“In today’s world, the transaction part of the business is assumed, but you can’t stop there,” he said. “You have to be very consultative, as well as being adaptive to changing or challenging a program and doing it every year.”
Brokers should avoid being static or slipping into a comfort zone with their clients, but rather, understand risk from a more dynamic standpoint.
“You can’t just be focused on coverage and loss control,” Baker said. “Instead, you should also be looking at how risk has become redefined into six different components and understand all of those unique facets to optimize a client’s total cost of risk.”
Brokers must also use their bountiful resources to stay ahead of the curve to keep a client’s best interest centralized, even if it may seem like an unnecessary forewarning in the present.
“Our job is to be one step ahead,” Baker said. “While we can’t predict the future, we can at least look at trend forecasting, because oftentimes we are talking to our clients four-six months prior to actual renewal date, and we want to have a more robust strategy that is best prepared for any curveball that may arise.”
Indeed the complexity of today’s market makes it harder than ever to analyze the health and prosperity of the industry in its totality.
“The industry is really fragmented due to its multiplicity, which means brokers and other professionals need to scrutinize each segment individually and become champions of that sector,” Baker said.
As previously mentioned, cyber insurance and liability is a relatively contemporary development in insurance but has since taken a stronghold of the industry due to the digitization of both commerce and life. As a result, cyberattacks have grown in severity and frequency, inviting a barrage of risks that can seem unprecedented.
However, a synergy between insurer and insured has been created to tackle these concerns with a more bespoke approach.
“The cyber market is a really great example of the partnership between clients who are purchasing insurance and the companies providing that coverage,” Baker said.
“We can step in and help insurance carriers to make sure their client knows that they are a good risk versus a tough risk, while also ensuring that they adhere to proper risk mitigation requirements to get the correct coverage they are searching for.”