Businesses are entering an era of increased risk, rising insurance premiums, and for some, reduced availability of coverage. While these trends vary by industry, type of coverage and geography, it is becoming increasingly clear that managing the cost of your company’s property and casualty insurance will require more proactive efforts in 2013.
Taking the time to talk with your HUB broker now and develop a strategy to manage the cost of your business insurance will save you headaches later.
Market Outlook for Commercial Insurance
After years of relatively flat pricing on property and casualty insurance, commercial insurance rates have increased over the past five quarters by an average of 4-5%. A recent MarketScout Commercial Lines Market Barometer indicated the overall composite rate for commercial insurance increased 5 percent in November 2012, when compared to numbers seen in November 2011. In terms of account size, those under $1 million in premium jumped 5 percent over the year. Companies that exceed $1 million in premium were up 3 percent.
In addition to price increases, insurance companies are moving toward tighter underwriting practices, according to surveys by Market Scout and The Council of Insurance Agents and Brokers (CIAB). Catastrophe-prone property underwriting has toughened, particularly along the East Coast. This means that companies with catastrophe exposures or higher-than-usual claims may have difficulty getting coverage, or their policies will have more exclusionary language.
Given these trends toward higher insurance prices and tighter underwriting standards, companies need to be very proactive. You are not powerless in the face of these changing market conditions if you work with your HUB advisor to develop a strategy.
Following are some quick tips on how to develop a long-term strategy to manage your insurance costs and enhance your risk management capabilities. Your HUB broker can work with you to tailor a plan that meets your specific needs.
Make Your Business a Better Risk
Reducing insurance costs is all about reducing risk. Premiums are based on estimated future losses, and the more you can do to reduce the probability of loss and become a better risk, the more your business can save.
Focusing your internal efforts on minimizing risk and enhancing safety is the first step. Understanding and addressing your key exposures is critical to managing your frequent and higher severity losses. Implementing appropriate company policies and training programs will help cut losses, reduce your claims, and increase compliance with federal and state regulations.
Whether or not you have an in-house risk manager, you should also leverage resources from HUB, as well as your insurance carrier. Start by talking to your HUB broker and to a member of the HUB Risk Services team to learn how a gap analysis can provide valuable information to control risk and reduce losses.
In addition to reducing your claim costs, this strategy has another important benefit: it makes your organization a more attractive risk to an underwriter. Insurance companies favor companies who value safety and risk management. If you can demonstrate a commitment to complying with the most recent safety regulations and industry guidelines, you may be able to secure lower insurance costs. By being more proactive in managing risk than your competitors, you can achieve a competitive advantage.
Know Your Coverage and Your Loss History
To ensure your insurance program is relevant to your business needs, it’s important to regularly review it with your HUB consultant and determine if your coverage is right for your company.
Review your losses and claims over the past several years. You may find that some claims from the past can be closed out, creating a more favorable picture of your risk profile. You should also look to explain losses that occurred in the past and are unlikely to occur in the future as a result of new procedures instituted.
Loyalty Can Be Important
Sometimes, it makes sense to switch insurance carriers in order to secure better rates and coverage. But, in an environment with shrinking underwriting capacity, switching carriers on an annual basis is not a sustainable, long-term strategy. Forging a stronger relationship with your carrier can lead to more flexibility around policy terms and conditions as well as more responsive claims service.
Your HUB broker can advise you on which carriers offer better terms as well as complementary resources to support your risk management strategies. The stronger the relationship you have with your HUB broker and your carrier, the better off you will be when you have a loss and need to file a claim.
Begin Your Renewal Planning Early
Start talking to your HUB broker at least six months prior your next renewal to maximize your options. Develop a strategy on how you will approach your insurance carrier to negotiate the best possible terms.
Transparency and full disclosure are important. Your business may be in a different position when you last met with your HUB broker. Be sure to share those changes with your advisor so he or she can determine if it will impact insurance pricing, marketing strategy and coverage.
Work with your HUB broker to prepare a presentation to your insurance carriers on why your company is a good risk.
Count on Your Relationship With a Trusted Advisor
In a complex insurance market, a trusted insurance broker can serve as your partner in developing a long-term, effective strategy to combat higher prices.
The more your HUB broker knows about your business challenges, the more effective they can be in determining the right coverage options and choices for your company. In addition, your HUB broker can provide you access to a wide array of HUB Risk Services consultants who have expertise in safety, security, property, and environmental risks.
Do not underestimate the strength that can come from working with a trusted advisor. Having an insurance professional at your side who understands your company and your industry is your main line of defense against rising insurance premiums and shrinking coverage.
Hub International is the exclusive endorsed broker for the Apartment Owners Association of California. For more information on the full area of products and services we offer tailored to you specific needs, please call Anthony Miller or his team at 800-227-7434 or email him at [email protected].