Most organizations look to financial risk transfer through insurance as their first response to managing risks. Out of all the risk management tools available, insurance can often be the most expensive option. There are a number of simple things that can be done to minimize your insurance-related costs and to get better terms in the insurance market through your broker.
First and foremost, budget for the market cycle. The insurance market is cyclical with wide swings between the peaks and valleys. Budget at the high end of the cycle and keep your budget consistent. When prices start easing, remember that an upswing is on the horizon.
Carry coverage appropriate to your needs. Your broker can help you make sure that you don’t over or under insure, that there are no gaps in coverage and no unnecessary coverages.
Ensure that your property values are accurate. Values for buildings, contents, equipment and inventory should be reviewed regularly so that you are adequately covered, but not too high or else you are paying too much.
Make sure your liability policy limits are reflective of your exposures. Strike a balance between anticipated maximum loss and cost of coverage. Liability limits are subjective, so the best limit is one that allows you to sleep at night!
Choose deductibles that will result in the optimal cost of risk. When you choose higher deductibles, you usually get lower premiums, so when shopping for insurance, get quotes for a few different deductible options. Many companies have deductibles way lower than any claim they would make. Ask yourself, “what is the smallest claim I would make to my insurer?”. If the answer is $10,000, then why is your deductible $1,000?
Sell your company to the insurance market. Insurance companies compare you with all the other companies in the same industry. Make sure that your insurer is aware of all the things you do that make you a better risk. The things you do in your organization to reduce down time, improve quality and to prevent losses make you a better risk than companies that don’t do these things. Insurance companies want to know that you care more about risk than they do. A great way to sell your company to the market is to structure, formalize, document and report your risk management efforts using ClearRisk Manager.
Finally, work with your broker more. Your broker will never know your company or your risk as well as you do. Spend time communicating your risk to them so that they can get you the best possible terms in the insurance market.
For information on registering for a free 30-day trial of ClearRisk Manager, click here.
Picture from Flickr Creative Commons via user clarinetgirl
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- Insurance is a Commodity! …Or is it?
- 8 Risk Management Points Every Broker Should Know
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