Organizations are constantly searching for opportunities to reduce insurance costs. Companies need to view their role in the insurer/insured relationship differently. The insurance company isn’t selling you insurance; you are selling them your risk. Don’t let them assume what you do and what your risks are.
By providing detailed risk management plans, including your organization’s ability to produce and implement trend analysis reporting, your organization is promoting its proactive and risk-conscious environment. When history is unknown, or the internal approach is more reactive than proactive, insurers will typically err on the side of caution. This frequently translates into higher premiums and more restrictive coverages and limits.
Follow these tips below to get the best insurance for your organization:
7 Tips to Control Your Organization’s Insurance Costs
- Get organized
Everyone hates insurance renewal time because you have to fill out forms, collect data and go through the whole agonizing process every year.
This is the computer age; take advantage of it.
Implementing a claims and risk management system is the best way to track, manage, and report on data. Renewals become effortless as all updated data can be exported and shared in minutes. Inside a claims and risk management system, you can scan and keep copies of all insurance renewal applications that you fill out.
Ask your broker if they have electronic forms that you can edit, so you can save and update them annually. Every risk management policy, safety policy, contract wording, sales agreement, marketing materials, and anything else that show your risk management process should be in this system.
By keeping this information up to date, renewals become much easier, less time consuming, and more effective.
- Risk improvement
Constantly work on improving your risk and documenting your efforts. Saying to an insurance company “here is our risk management plan and here are all the things we implemented to improve our risk” is a lot better than saying “we winged it.”
Every successful organization manages risk whether they know it or not. You are already doing a lot right now to mitigate your risks. Take it a step further by implementing a claims and risk management system. This way, your organization can easily report on trends, uncover causes of past occurrences, and show what’s being done to mitigate the frequency and severity of future losses.
Presenting this data demonstrates you’re actively managing risk and have a plan in place to minimize future occurrences. This process makes your organization more attractive to insurance markets and dramatically affects the cost of insurance premiums.
- Take it seriously
How much does your organization spend a year on insurance? How much time do you spend on preparing your insurance application and renewal?
Now consider how much time you would spend going after a customer that paid you annually as much as your insurance costs.
The amount of time should be the same, but you more than likely spend a fraction of the time on insurance as you do on the sale.
- Start early
Contact your insurance broker 90 days before your renewal date and start working with them to get your application and renewal documents together. Ask your broker what their renewal strategy will be for this renewal.
- Use your broker
There are good ones and bad: don’t settle for substandard service.
It is a very competitive business, so if your broker doesn’t want to make an effort there are a hundred lined up behind them that will. Make sure your broker has the experience and access to plenty of insurance markets that write your type of insurance coverages.
- Get your hands dirty
No matter how good your broker is, they will never know your business as well as you do. That being the case, how can they be expected to communicate your organization’s risk effectively to the insurance market? Work together with them. Your broker can add a lot of guidance and value, but you are your organization’s best salesperson!
- Make it personal
Write an executive summary for the insurance companies and give it to your broker to include with the marketing submission they prepare. The letter should give an overview of your risk, why you are a good risk compared to others, and the highlights of the things you do to mitigate the risks in your business. It will let the insurers know you care about your risk and leave them with a positive impression of your organization.
Remember, people make these decisions, not computers, so the impression you make is important.
OUR TOP 10 INSURANCE TIPS
- Don’t Just Assume Your Broker/Insurer Knows Everything
– Enter into regular communications.
– Check all documents and statements of fact/proposal forms to ensure that the information contained therein is complete, correct and up to date.
- Disclosure All Material Circumstances and Facts & Keep Insurers Updated
– This is of paramount importance as the claims verification process is now far more rigorous than ever before and insurers will perform checks for CCJs, insolvencies etc.
– See www.insurance2day.co.uk/disclosure-material-facts for further details regarding liability, material damage and general material circumstances and facts.
- Check Compliance With Policy Terms, Conditions & Endorsements
– Insurers impose these for a reason – usually as a result of previous claims/losses!
– Check your policy wording, as well as the schedule of cover and statement of fact/proposal forms.
– For commercial policyholders, these are likely to include amongst others: minimum security conditions (physical and alarm); electrical inspection requirements; work away exclusions; portable heater exclusions; trade specific exclusions and/or conditions etc
– For fleet policyholders, these are likely to include: driver age, licence &/or vehicle restrictions; driver checks; reporting requirements in respect of changes of vehicle and MID updates; all vehicles being owned by/leased to the policy holding company (unless specifically agreed otherwise); no employee owned vehicles to be driven under the fleet; no business use or commuting, other than in respect of the policyholders business etc
- Check Your Basis Of Cover
– Most policies provide cover on a ‘reinstatement as new’ basis, however if any plant and machinery has been purchased second hand/reconditioned, then so long as ‘like for like’ replacements would be widely available in the event of a loss, cover may be more appropriately arranged on a specified ‘indemnity’ basis.
– Where cover is provided on a ‘reinstatement as new basis’, the sums insured need to reflect the full reinstatement as new costs, allowing for inflation.
- Be Aware Of Average
– Most policies carry an average condition, which essentially means that in the event of a loss, insurers would scale down a claim in proportion to the level of any under insurance:
i.e. (Sum Insured ÷ Full Value) x Full loss = The proportion that will be paid by the insurer.
– The average condition usually applies to all sections of covers, therefore care needs to be taken to ensure that the declared values remain adequate at all times.
- Check Your Scope Of Cover
– Material Damage – Buildings: Don’t confuse the market value of a property with the rebuild value. Even with new builds, the cost to demolish, clear a site and rebuild following a loss, will be significantly greater than the original build cost. Be mindful that not all insurers apply index linking when offering renewal terms.
– Material Damage – Contents: Don’t assume your contents sums insured are adequate, as the total cost of replacing all business contents purchased over the years, including plant, machinery, tooling, fixtures, jigs, racking, fixtures and fittings etc can so much greater when itemised and added up. If stock levels vary, ensure that adequate cover is in place for the worst case scenario.
– Goods in Trust: Check whether you are contractually responsible for insuring any free issue materials, tooling and other good in trust. If so, ensure that your policy covers these.
– All Risks: If laptops and/or other business contents are taken away from the premises, check what territorial limits apply.
– Business Interruption: Many commercial policies provide cover on a ‘Gross Profit’ basis, however the sum insured for insurance purposes differs from an Accountant’s definition of Gross Profit and is calculated as follows:
‘Turnover (plus closing stock/work in progress) LESS Purchases (less opening stock/work in progress)’.
Once this figure has been calculated, it needs to be adjusted to allow for the required indemnity period (the maximum time that it could take your business to get fully back up and running following a claim) e.g. 24 months = Gross Profit x 2) and also for any anticipated growth during the period of insurance.
– Goods in Transit: If goods are sent by hauliers/third party carriers, don’t assume that they will fully indemnify you in the event of a loss, as the Road Haulage Association Conditions of Carriage 1998 only provide cover for up to £1,300 per Tonne! Where cover is arranged for own vehicles, check whether overnight theft cover is operational and the conditions that may apply.
– Liability: The limits of indemnity for Employers and Public Liability usually provide cover on the basis of ‘Any One Occurrence’ however for Products Liability the limit is the total insurers would pay for ‘Any One Occurrence and in the Annual Aggregate’.
- Be Aware Of Claim Reporting Procedures And Requirements
– Insurers do at times impose very strict reporting requirements, irrespective of whether as claim is to be made.
– Always forward communications to insurers, unanswered and without delay, and do not enter into any discussions or communications in respect of liability without your insurers formal consent.
- Consider Your Need For Run-Off Cover
– If you change your business activities and/or corporate structure, it is always prudent to maintain run off cover for professional indemnity (PI), directors & officers (D&O) and public/products liability (PL) polices. This is because PI and D&O polices would only respond to ‘claims made’ during a period of insurance and ordinarily PL policies only respond to damage or injury ‘claims occurring’ during a policy period (unless written on a ‘claims made’ basis like PI & D&O).
- Additional Covers
– Historically you may not have considered additional covers, however some of these can provide invaluable protection for you and your business. www.insurance2day.co.uk/speciality-insurances/optional-additional-cover
- If In Doubt Ask!
– If an issue arises, such as an employment related matter, tax investigation, contract dispute etc, contact us as you MAY have access to advice lines and/or cover if you have commercial legal expenses and/or a Management Practices Liability (D&O) policy in force (N.B. there are strict requirements in respect of the notification of incidents that may give rise to a claim, so if in doubt check!)
In closing, we would just like to draw your attention to the following:
UK insurance industry reviews have identified that:
– Up to 80% of Commercial Properties are underinsured
– Over 40% of Business Interruption policies are underinsured
– Many businesses don’t have adequate machinery, plant and trade contents sums insured
– Over 70% of businesses involved in a major fire either do not reopen, or subsequently fail within 3 year
The Financial Conduct Authority’s (FCA) review into SME Commercial Claims found that:
‘While businesses often talk of being ‘confident’ about what they are covered for prior to a claim, many find that the terms and conditions, warranties and exclusions subsequently prove that they didn’t have the cover they thought they had’