FUN & PROFIT
BY BARRY SEIGERMAN
In my April column, I shared how insurance agents and brokers need to become entrepreneurs in addition to being good at insurance. We included various ways to
increase revenue growth through horizontal and vertical
diversification. One option that is also available — and often
overlooked — is adding fee income via insurance consulting
as a source of revenue.
Should agents and brokers add consulting services as
an additional revenue source? If so, what’s required, what
are the pros and cons, and what exactly does an insurance
consultant do, anyway?
To help with this topic I reached out to interview John
K. Mulvey, principal of WLF Consulting LLC in the New York
City Metro area. John has an extensive insurance background: He was a commercial underwriter and marketing
rep for a large insurance company, became an owner and
partner in a multi-line independent agency for more than
three decades, and has served as a senior vice president
with a bank-owned agency. He initiated consulting as a
revenue stream for the agency, and has continued to grow
his business as a full-time insurance consultant.
Emphatically, John feels that for the agents and brokers
capable of learning the skills necessary to do risk analysis
there are several major benefits. It adds to their expertise
and they become more skilled and knowledgeable through
their continued learning, which in turn benefits their insurance clients — which is great for retention. They become
better equipped to target-market their agency and prospect
to larger, more sophisticated customers, and the consulting
fees can become an important separate revenue stream.
John adds one major caveat: You cannot be a consultant
for the same client for whom you serve as an agent or
broker. This would be an ethical conflict of interest. Your
consulting clients and insurance clients have to be separate.
Examples of some of the typical consulting services that
can be provided to clients include:
Risk Analysis – which includes a review of a firm’s
entire operations and facilities to detect and identify
major exposures to loss both catastrophic and
minor, what exposures should be either insured
or retained, and making sure that all entities are
included in the insurance program;
Loss Control – assist the client with loss-prevention activities and compliance with insurance
company loss-control recommendations;
Claims Review – periodical (three to six months)
review of claims with the client and the carrier,
being involved in decision-making for setting
reserves and claim settlements;
Broker Selection – determine the expertise of a
client’s insurance broker and conduct a personal
interview with any broker to be engaged;
Workers’ Compensation – conduct annual
experience modification analysis;
Requests for Proposals – create RFPs and review
all insurance bids and specifications for coverage
and determination of competitive pricing; and
Carriers – determine whether insurance companies
are admitted or non-admitted, and review their
ratings and financial strength.
Although brokers don’t always relish when a client
engages an insurance consultant, in John’s experience the
client usually accepts all the consultant’s recommendations.
Clients need the non-conflicted opinion on their insurance
programs, as there is no vested interest in commissions. The
consultant is hired for a fixed fee, not contingent upon how
much or how little the client buys.
Agents and brokers can become capable of improving
their skills to offer consulting by taking insurance courses
like CPCU or CIC, insurance company training, college-level
courses, and good old on-the-job training coupled with years
of experience in the business. There is a growing need for
insurance consulting today, especially for smaller and mid-sized clients due to the new exposures to loss arising from
cyber and other often-unrecognized perils that are very real
threats to business.
John K. Mulvey can be contacted at firstname.lastname@example.org. Barry
Seigerman ( email@example.com) is an independent broker/producer.
Insurance Consulting: Is It
a Good Move for You?
EXAMINING THE ROLE AND RESPONSIBILITIES
OF THE CONSULTANT, AND HOW TO BECOME ONE