Key points
- Insurance premiums are rising due to external causes outside an insured business’s control.
- Insurance brokers should perform an annual analysis of whether your cover offers as much value as possible.
- Conducting a risk analysis with your broker and mitigating risk internally before claiming insurance can help to reduce premiums.
Insurers operate in a global market, meaning pricing and risk assessments are influenced by factors beyond any single region or country, says Taidhg Flanagan, Director of Paragon Insurance Broking.
“This interconnected nature makes it challenging to pinpoint the causes of price increases for specific types of insurance, because they are often influenced by a combination of global and local factors,” he says.
Some of those factors include reinsurance costs, global capital flows and investment returns, natural disasters that impact the global insurance market, pandemics, economic instability, geopolitical tensions, supply chain risks and more.
Though these external risks are outside the control of business owners, that does not mean they should give up on managing the cost of their own insurance cover, Flanagan says. In fact, there is plenty they can do to mitigate risk and help manage insurance costs.
The Insurance Council of Australia (ICA) advises businesses to do their research on insurance products and simplify their policies.
“There are some things all customers can do to reduce the cost of their insurance, including shopping around to make sure they have a product that suits their budget, simplifying their policy to only cover assets they must insure, and lifting their excess,” says an ICA spokesperson.
“Businesses can also seek the services of a specialised broker who can assist in sourcing the right insurance and offer advice in relation to risk management and mitigation. Having a good broker that understands your business is as important as having a good accountant.”
Ask your broker to help reduce your risk
“Insurance brokers provide SMEs with tailored coverage that aligns with their specific needs and leverage their industry expertise to identify gaps in coverage and recommend appropriate policies,” Flanagan says.
A broker will seek to understand how a business operates to identify risks and opportunities to de-risk to help reduce insurance costs.
A broker will look at details about:
- Daily operations, products and services offered;
- Specific risks associated with the industry;
- Previous insurance claims and their outcomes;
- A comprehensive list of physical and intangible assets, as well as existing liabilities;
- Number of employees, roles, and any specialised training or certifications;
- Business location, including any environmental risks;
- Current risk management practices and safety protocols; and
- Contracts with clients or suppliers that may impose liabilities.
This captures the risk landscape and how to mitigate potential issues before securing insurance. “It is often the simple things which will make the most difference,” Flanagan says. “Conducting a comprehensive risk assessment to identify potential risks to the business will certainly help … then implementing strategies from there.”
Some examples of non-insurance risk mitigation include having adequate fire protection relative to the operations conducted at the premises and upgrading physical alarms, external lighting, CCTV and cyber security tools. A business continuity plan helps insurers know you will remain operational in the event of a loss or disruption. If the business has a fleet of vehicles, owners are advised to install tracking devices and ensure drivers receive training in responsible driving.
All of these will help reduce premiums because they minimise or remove risk.
Questions to ask an insurance broker
Depending on what stage you are at in your relationship with a broker, there are certain questions Flanagan advises to ask insurers.
If the relationship is a new one, they include:
- What types of coverage do you recommend for my business?
- How do you assess my specific insurance needs?
- How do you stay updated on changes in the insurance market?
- What is your process for claims support and assistance?
And if it’s at renewal:
- Did you conduct a remarket of our coverage? Remarketing means reassessing your risk profile and adjusting premiums accordingly.
- Can you explain the differences between policy options?
- Are there any exclusions or limitations we should be aware of?
“Upon renewal, your broker should be communicating firstly whether they have conducted a remarket – for certain policies it’s not wise to remarket every year – and secondly the various options available in the market if a remarket has occurred,” he says. “There may be a cheaper option, but does it include certain exclusions or limitations?”
Flangan says reducing the risks is not only better for business but will help bring down premiums.
Information on IPA Insure HERE.
