People are always looking to improve their insurance coverage and simultaneously save money, but the two do not necessarily go hand in hand. In addition, most people do not know enough about insurance policies and distribution methods to make their search as effective as possible. This is the second of a two-part article that will attempt to offer some insight into this process. This installment will focus on insurance for businesses, as the previous one focused on insurance for individuals.
Businesses, unlike individuals, are exposed to a multitude of risks that can affect the financial well-being of the organization to the point of failure. Such scenarios not only affect the owners and/or the shareholders of the organization, but employees, their families, customers, and related organizations. Therefore it is of the utmost importance to implement the best risk management practices possible. But because the majority of businesses are too small to administer their own risk management department, they turn to third-party providers, most often insurance agents. Unfortunately most decision-makers are not equipped to evaluate the knowledge, expertise, and resources of the agents to whom they are entrusting the financial safety of their company, and consequently turn procurement of insurance and risk management into a bidding exercise. The result is, more often than not, substandard coverage.
There are significant differences in the way insurance policies respond to claims, as well as in the exposures each individual business faces. Without experienced and talented insurance/risk management professionals who have access to the best carriers analyzing and placing coverage, a loss has a much greater potential to cripple an organization’s ability to survive and thrive. Therefore it is imperative for a business to take the correct steps in putting in place a risk management program that is both appropriate and cost-effective. Here are four steps to consider:
1. Find the right agent – Evaluate the competence of your agent in terms of the coverage program that has been put together. Has your agent marketed your account to other insurers where appropriate, and offered suggestions on alternative plans that can minimize your premium costs? Does the agent review leases, experience modifications, etc.? Also, since the relationship of the agent with the insurer is critical, consider using an agent that has a substantial amount of premium volume with insurance carriers writing your type of business. Look at the professional designations that your agent has earned. Agents with the Certified Risk Manager (CRM) or Certified Insurance Counselor (CIC) designations have demonstrated a high level of expertise.
2. Become the object of desire among insurers – A clean loss history, formal safety programs for the business premises and employees, good housekeeping, and a general commitment to risk management can make insuring a particular organization much more attractive to insurance companies, often resulting in lower premiums.
3. Start early – In order to gain control over otherwise unacceptable increases, businesses must start early in the process of reviewing their program with their agent and determining what insurance companies to pursue for renewal quotes. Generally speaking, 90 days prior to expiration or earlier is a good gauge. With the flood of applications being sent to insurers in hopes of avoiding increases, insurers are in need of more time to review submissions.
4. Avoid flooding the market with applications – It may not make sense to have three or four agents shopping your insurance. Rather, pick one to market your account to selective insurance companies that have an interest in your class of business. Insurers know which accounts are shopped every year and shy away from those accounts.