Going too low on insurance cover is risky for any business. But how can you be sure your insurance premiums are in line with market rates?
The stakes are high, too, with Marsh’s quarterly Global Insurance Market Index reporting that international commercial insurance pricing increased by an average of 15 per cent in the second quarter of 2021. Prices in the Pacific region, where Australia is the largest market, rose by a staggering 23 per cent.
In such an environment, the performance of your insurance broker is critical to ensure you maintain an optimal insurance program, regardless of the market cycle. However, they are not a silver bullet, and it is crucial that your broker understands your business’s situation and needs to deliver the best insurance policies possible, and within budget. Following are some smart ways to get the most out of your broker.
1. Conduct a broker tender process
An independent insurance consultancy can help businesses implement and manage a competitive tender process for the provision of insurance broking services.
Even though you may be satisfied with your incumbent broker, such a check makes sense and can often reveal weaknesses in your insurance approach that might otherwise go unnoticed, whether that is related to costs, cover or even the broker itself. Such a tender analysis should factor in whether the broker has specialist expertise and a proven record in your particular sector.
2. Set appropriate KPIs
In locking in a broker, it is important to factor in pre-agreed key performance indicators (KPIs) that match your business’s particular insurance requirements and service expectations. By clearly defining those deliverables, which should be linked to the broker’s remuneration, there is greater transparency and both parties are more likely to be satisfied over the long term.
3. Ask how premiums will be calculated
Many businesses simply buy insurance without realising what drives their insurance premiums, and what level of information is necessary to negotiate the cheapest possible rates. A good insurance broker should be able to advise about some of the factors at play here.
For example, approaching an insurer for renewal terms using low-quality or ambiguous information surrounding a company’s risks (and subsequent insurance needs) can push up premiums, as insurers typically fill any gaps in information with premium. Your broker should inform you of this and offer strategies that ensure your company risks are clearly conveyed using high-quality data that presents your business to insurers in the best possible light.
Be sure, too, that you are not paying any hidden commissions or fees to your broker.
4. Review your policy wordings
Carrying out policy wording reviews of your key classes of insurance is important – and something a good broker should be across. They must be able to provide feedback on areas of possible improvement because subtle differences in the wording of policies can make all the difference as to whether coverage exists or not.
5. Examine your broker’s research capacity
Solid research should be at the heart of a broker’s insurance recommendations. That research helps identify any existing or emerging industry risks, and it informs relevant insights into insurance needs.
No one broker has exclusivity of good ideas, so businesses should quiz brokers about their research practices, knowing that the best research is likely to lead to the best insurance outcomes.
The Lion Partnership is a privately owned, specialist consultancy group that supports businesses through the complex and often costly exercise of implementing efficient insurance programs. For more information, visit www.thelionpartnership.com.
Blog Submission: Peter Sellwood
PALTD InsureRight – Insurance & Risk Management
Contact us today to speak to our insurance specialists for more information.