Banking, insurance

Abstract

Selecting an Agent or Broker Perhaps as important as the question of which insurance coverages a bank should purchase is the decision made by the bank in selecting the agent or broker and insurer to meet its insurance and loss protection needs. Bankers are well aware of the Bank Secrecy Act handbook Know Your Customer rules, designed to mitigate the potential of the bank being defrauded in check fraud and money laundering schemes. The Office of the Comptroller of the Currency (OCC) acknowledges that firm Know Your Customer policies are a bank's most effective weapon against being used unwittingly to launder money. While the OCC is not involved in the process of assisting a bank in selecting an agent or broker or insurer, the value of knowing the parties the bank is dealing with in this arena is of critical importance as well. Fortunately, many commonsense criteria apply to the decision process associated with Knowing Your Agent or Broker and Insurer. The bank should examine a potential agent or broker with certain characteristics in mind. Their integrity should be unquestioned, while knowledge of the banking business is a prerequisite. At the same time, they must be experienced specifically in insurance coverage for banks; therefore they need access to the specialized financial services insurance markets. These are specialists focused to meet the loss protection needs of financial institutions. Last but certainly not least is how responsive the agent or broker to the needs of the insured. What type of customer service can the bank expect? Selecting an Insurer Similarly, when selecting an insurer, price is only one component of the decision making process. Many of the same attributes required of the agent or broker, may also be applied to the insurer as well. Of equal or greater importance, banks need to consider whether the insurer specializes in products for financial institutions, and can meet all of the bank's bonding, property and casualty insurance, and loss protection needs. Issues a bank may wish to consider in analyzing how a potential insurer may successfully meet its specific needs include the following: Does the insurer have a track record of underwriting and claims handling partnership with financial service firms with positive results? Does the insurer provide value-added services, such as educational materials for bank employees and directors, including loss control or risk management advice? Is there local representation that includes underwriting, and claims settling authority? How timely and responsive is the company's underwriting service? What's their turnaround time on quotations? What's their reputation for timely and responsive, and, most importantly, fair claims handling service? What do you really know about the insurer? What's their financial condition? Do they have a stable, consistent presence in the marketplace? By the same token, do they have underwriters who are experienced with a long-term presence and understanding of the financial services arena? Is the integrity of the company unquestioned? You need to be confident that confidential information that is disclosed to the underwriter will be kept in confidence. Where your operations are multistate, is the underwriter able to deliver the same coverage and service in every state you need? Are they licensed to write business in your state? An unlicensed insurer is not subject to the jurisdiction of your state insurance department, and no protection is afforded under the state guarantee fund. What to Insure Traditional banking exposures to loss are well documented and covered by basic insurance programs. Fire, theft, slip and fall, robbery, extortion demand, shareholder suits against board of directors are commonplace exposures to the financial services firm. Today's banker also needs to be cognizant of new exposures resulting from extraordinary events, new business opportunities, changes in law and regulations, and advancements in technology. …