How can CEOs mitigate the potential for increased insurance costs when it comes time to renew their policies?
Provide the underwriter with the most complete information that you can. This will increase the level of confidence the underwriter has in your operations. You can never overprepare for renewal. By giving the underwriter detailed information, you enable him or her to accurately assess your insurance needs.
If you understand your risk profile, you can represent your risks in the most positive light. For instance, do your facilities have the proper construction for your specific operations? If they do, that can be used as a gambit in your negotiations. If they don’t, then you need to make sure you have a plan in place to protect your income and property. Understand that loss prevention and assessing the total cost of risk are key components to be used in the underwriting process for property insurance.
Underwriters look at your risk profile, but they also want to be sure you understand their profile. If you don’t have specific measures in place when it comes to covering risks for the property itself, what are you doing to cover those risks?
If your facility is not geared toward its specific purpose, you need to communicate to your underwriter the things you are doing to mitigate those risks.
How can a business effectively negotiate a property insurance renewal?
Starting early with your broker is key. Develop a concise, clear, comprehensive submission to the market. The quality of that submission will determine the insurance capacity and pricing. If you have a solid submission, your broker is going to be much better able to determine the cost of risk.
If you have a property that is exposed to catastrophic losses, such as coastal windstorms, earthquakes or floods, it’s also important that those risks are noted. Some exposures require inspection by insurance carriers prior to them quoting a rate. If you don’t give yourself plenty of time, you can get behind the eight ball.
Like everything else with technology, computer modeling enables underwriters to evaluate catastrophic exposures prior to quoting the coverage. If you’re not already doing this, you should be working with your broker because he or she should be able to assist you with the evaluation.
However, if you are providing inadequate information for the computer models, that can adversely affect the insurance capacity you’re going to get and it could generate a higher premium.
How early does a company need to begin the renewal process?
If you have a May 1 renewal, you should be talking to your broker in January or February at the latest. The earlier you get your submission to the underwriter, the more comprehensive your information will be and the more likely you will get a more accurate view of your total cost of risk.
The process should start 90 to 120 days prior to renewal, and the completed submission should get to the market 60 days before renewal. Your steps are to gather information, get the submission ready, and then you send it to market. That’s when your broker will start the process with the underwriters to get you the best rates and best coverage.
Tony Inskeep is vice president with Aon Risk Services. Reach him at (216) 623-4146 or [email protected].