How to Reduce Insurance Premiums in a Hard Market: This article will help you reduce insurance premiums and arm yourself with the knowledge you need to ensure you are getting value for money.
In 2019 and 2020, a combination of factors led to a tumultuous period in the Professional Indemnity insurance marketplace, further exacerbated by Covid-19. The tragic events relating to the cladding at Grenfell Tower, along with numerous Design and Construct claims e.g. relating to basements and swimming pools, resulted in a number of carriers completely exiting the marketplace. As a result, those surviving markets had their capacity reduced, with the result being (i) far tighter underwriting criteria, (ii) lower limits being offered and (iii) there being a significant move towards cover only being offered on an ‘aggregate’ limit basis for some professions.
2020 saw the extreme hardening of the Directors & Officers insurance marketplace. Exposure for directors and officers continue to increase for many differing reasons, including increased regulatory scrutiny and, most recently, Covid-19. In fact, there is considerable uncertainty regarding the future given the ongoing impact of Covid-19 and concerns over a potential wave of insolvencies.
In response to this trend, we continue to expand our panel of insurers. We hope our following Tips to reduce insurance premiums will assist you in securing the most favorable commercial and property insurance terms.
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Top Tips to Reduce Insurance Premiums
One way of reducing costs is to reduce your scope of cover and/or quality of insurer. However, the far better way is to allocate time to reviewing your insurances and focus on the quality of information you provide. Consider your need to arrange insurance as a challenge to get more for your money!
- Do you need all the insurance covers you have? You simply may not require every cover or may have duplicates elsewhere?
- Are there any other covers you ought to consider but don’t have e.g. Cyber, Directors & Officers, Legal Expenses etc
- Where cover is arranged based on Statement of Facts, these will contain assumptions. Are these all correct and do they accurately reflect your risk profile?
How to Save Money on Professional Indemnity Insurance
The quality of your risk submission has never been so important. Whilst in the past insurers may have asked for clarification in respect of any unanswered / incomplete questions, they are now more likely to just decline to offer terms.
- Insurers make underwriting decisions based on a variety of factors, and the quality and clarity of information presented to them really can make a difference in terms of both the levels of premium quoted and willingness to provide cover.
- In addition to submitting a proposal form, consider providing a brief summary overview. Outline your business. Detail the scope of your roles and responsibilities. Comment whether you consider your business to be low, medium or high risk. Professional Indemnity insurers are being inundated with quote requests. This is your opportunity to make your submission really stand out from others.
- Be careful not to over broke. Insurers, seeing the same risk from more than one broker, are more likely to decline to quote.
How to Save Money on Directors Officers Insurance
- In addition to your last complete financial year figures, provide up-to-date information. Accounting information at Companies House just isn’t sufficiently up to date to enable insurers to assess Financial Lines risks.
- Insurers will fundamentally want to know whether you are: Trading profitably. You are able to pay your debts as and when they fall due. That you maintain a positive net worth. You submit your accounts to Companies House on time, with an unqualified (clean) auditor’s report. That you have not had to make employees redundant etc.
- Many Directors Officers, insurers issue terms based on assumptions contained within a Statement of Fact. It is essential that these are checked to ensure they are complete and correct.
- Where companies haven’t reported trading profits, terms may still be secured. Information is however key. Insurers may look to impose insolvency exclusions and/or increased excesses. The more clearly a risk is presented, the better prospects there are to secure favorable terms.
How to Save Money on Property Insurance
- Present Your Risk Profile Well – promote all positive features.
- Consider Higher Excesses / Restricted Covers (if you have the financial resources and inclination to self insure!)
- Ensure you have the correct rebuild sum insured by arranging a Rebuild Valuation Survey, or at the very least a Desktop Rebuild Cost Assessment, (to avoid (i) over insurance and the cumulative premium cost over many years and (ii) under insurance and claims potentially not being paid in full)
- Check you have Robust Security measure in place, to comply with your insurers minimum security standards and prevent losses. Consider how hard it would be for you to break in if you got locked out?! Are your Alarms/CCTV systems/Locks/Padlocks effective and sufficiently robust?
- Implement Proactive Property Maintenance, to prevent losses and ensure compliance with policy terms and conditions.
- Ensure you are Complying with Legislation, e.g.
Fixed Wiring Inspections i.e. Electrical Installation Condition Report (EICR) and Portable Appliance Testing (PAT)
Fire Risk Assessments
Gas Boiler Checks
Asbestos Surveys etc.
N.B. Some insurers allow discounts where you have a satisfactory fixed wiring certificate to prove compliance with the Electricity at Work Regulations, however many other insurers require as a condition precedent to policy cover.
How to Save Money on Commercial Insurance
All of the above and …
- Be clear and ensure you provide details of the full scope of your Business Activities.
- Differentiate between any different types of manual labor (e.g. production / warehouse / drivers / work away excluding heat / work away including heat / work at height / work at depth / work at hazardous locations etc.)
- Implement Proactive Health & Safety Risk Management (as good Health & Safety = fewer accidents = better risk)
- Ensure adequate employee induction and training
- Ensure all activities are adequately risk assessed
- Ensure all employees have adequate Personal Protective Equipment (PPE) and are trained to ensure they know how to use it correctly
- Use Accident & Near Miss Investigations, to conduct trend analysis. This enables you to identify and implement preventative measures
- Undertake regular Tool Box Talks and Workplace Checks & Audits (to ensure the ongoing identification and management of risks)
- Review your Supply Chain (as good management increases the prospects of successful subrogation in the event of a claim)
- Ensure adequate Control of Contractors (keep a log of all subcontractors’ insurance details, issue Hot Work Permits for hot works and request Risk Assessment Method Statements (RAMS) in respect of any works undertaken)
- Invest in externally Audited Quality Systems (e.g. ISO9001, ISO14001 and ISO45001)
- Minimize Fire Risks by reviewing the need for any unattended forklift truck charging and/or unattended machining operations (many insurers now don’t permit either of these, or those that do usually require monitored fire alarms and/or fire suppression systems)
- Minimize Power Surge / Power Outage risks by protecting your computers & machinery with power surge protection (computers and servers can be damaged beyond repair by a power outage or surge. Machining operations halted mid-cycle can result in avoidable damage to components, tooling and machining centers. Power companies don’t guarantee a continuous uninterrupted supply and therefore usually refuse to indemnify any claims!)
- Ensure suitable arrangements for the storage of Flammable or Dangerous Substances and adequate Control of Substances Hazardous to Health (COSHH) Assessments
- Review your Business Continuity Planning (to mitigate potential business interruption losses)
And, most importantly, relate all of the above proactive risk mitigation measures to your broker!
How to Save Money on Motor Fleet Insurance
- Carefully manage your Driver Risk Profile. Closely manage who you allow driving company vehicles
- Insurers may impose age / driver experience restrictions, however if they don’t, they may agree to reduce your premiums if you are willing to accept driving restrictions
- Advise your insurers if you undertake driver training & monitoring (telematics)
- Update your insurers of any Technology & Security you have invested in e.g. Dash Cams, Trackers, Steering Locks etc
- Consider Higher Excesses / Restricted Covers for older vehicles / SORN vehicles not used
Minimize and Mitigate Risk
The very best way of saving money, across all types of commercial insurances, is to Minimize and Mitigate Risk. Since all claims, losses and/or circumstances that may give rise to a claim are disclosable, irrespective of whether a claim is made, prevention is the best course of action. Be Proactive, Not Reactive – it’s cheaper to get things right first time round.
You only have once chance to make a good impression, therefore ensure you clearly flag up all the reasons why an insurer should favor your risk over another similar proposition.
Advice and Guidance | Reduce Insurance Premiums Today
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