When it comes to insurance premiums, business owners should be taking advantage of the soft market. Many business owners are renewing at lower premiums and believing they are getting a good deal. However, they are frequently leaving money on the table. There has been a substantial flow of capital into the insurance market, creating new capacity and new insurance carriers. These new carriers as well as existing carriers have a tremendous appetite for premiums and a piece of the action.
Smart Business asked Roger Stewart, president of Surmount Insurance Services, about savvy ways to save on insurance.
What does the current market mean for business owners?
Insurance carriers will once again be fighting for your business. It is important to pick a partner that will ‘weather the storm’ with you. Insurance companies have boasted record profits with what is thought to be inflated premiums; shareholders demand it. In order to expand, they have to write new lines of coverage in industries that were only recently considered taboo or too high risk, and insurance carriers can’t pick up new accounts without increasing coverage or lowering premiums to undercut their competition. Existing insurers have to compete with the new capital, new insurance carriers and new capacity in the marketplace. With the increased supply of capital and the remaining constant, prices fall. And in this market, they are falling quickly.
Should all business owners take action?
First, business owners should ask themselves certain questions about their current insurance program:
- Am I paying too much for my program?Having accurate market pricing information is key to getting a good deal on your insurance policy. Most market information comes from the carriers and select industry groups. It is not uncommon to see issuing statements and information that are six months behind what is actually obtainable in the current marketplace.
- Will my current coverage be inadequate in the event of a loss?Remember, if something seems too good to be true, it probably is. While you may see a reduction in price it is important to make sure you are not sacrificing coverage.
- Have I had trouble with the resolution of a claim?This is what you have been paying for. If you have not been able to have a claim handled to your satisfaction, you may have a service issue with the company’s claim department or this may be an indication that you are not carrying proper or adequate coverage limits. Either way, this calls for an evaluation of your program.
- Do I have an insurance problem that needs a solution?If you have a problem that cannot be addressed by your current insurance program, you and your broker need to reassess your needs and the availability of solutions in the marketplace in order to come up with an effective and affordable program.
How does a business owner choose the right broker?
Pick a broker who’s an expert, not just someone who writes a few policies a year. Someone who’s in the business of insuring companies like yours will know the best timing for renewals, the latest twists in pricing and the companies that can offer you the best deals. Because this person is a broker writing millions of dollars of coverage and not just your premium, he or she can exercise more leverage on your behalf. Also, make sure your broker has a good team — one with claims, loss control and alternative risk expertise.
What else should owners know?
Have a renewal strategy. Work the cycle; don’t let it work you. Pay attention to what time of year your policy is set for renewal. You may want to change your renewal date to when insurance companies are looking for premiums to make their numbers. Renew early. Don’t be held hostage by last-minute quotes. We’ve all seen those renewal options that were presented the day before the renewal. Have the broker present the quote early enough to be reviewed. Then you can look elsewhere if you don’t like what they’re offering.
You should have a relationship with the carriers, not just the broker. They need to know who you are and what your expectations are. Plus, being on a first-name basis will help if you need a favor from time to time.
Roger Stewart is the president of Surmount Insurance Services. Reach him at [email protected].