You may have heard in the business news that the insurance market is hardening. This means that premiums can increase, cover can be restricted and insurers are less inclined to take on new clients; essentially it can become difficult for a business to keep their costs down for those essential insurance covers and unfortunately shopping around for competitive alternative quotes rarely delivers results , so how can premiums be managed – well, Risk Management can play a key role.
We understand that every business needs to manage their bottom line and insurance can be a large expense which is likely to grow over the next year or so. It is therefore important to understand how you can gain the best possible rates and cover from your insurer.
To understand where risk management fits in, it’s worth considering some of the factors that contribute towards insurance premiums. The insurer takes into consideration the inherent risk the business presents together with physical hazards and the amount of risk exposure i.e the likely cost of claims. They then add in their own expenses and this, produces a premium. The underwriting features behind this are much more complex but the insurer is aiming to charge a premium that covers all these elements and delivers a profit. The more that a business claims from an insurer, the tighter their profit margin becomes and so they look to increase the future premium hence the saying ‘those who claim less pay less’.
As we enter a hard market you have little control over the increase in the base rates insurers charge they will also increasingly become more selective as they look to choose the businesses who can deliver the best profit margins. This means it is vital that your business does everything it can to reduce the risk of having a claim, hence improving your risk management. The better the presentation to insurers as to how well you are managing your risk, the better the terms or premiums you will have, even if in these tough times, it is still an increase on previous years.
The nature of your business will determine where you should focus time and possibly money to improve your risk profile. For example, for business in perceived high risk environments such as manufacturing and construction, it is vital that the focus is on employee safety, whether this is training or better PPE and of course it is essential that your insurers are aware of the investment that has been made.
Whatever your industry, good risk management will be an important element of your business and that can have a positive impact on your insurance costs. For more information on how we can help with Risk Management, please contact Rachel Storey on 07823 880202.