Reworded Business Insurance is important for the business to get best outcomes with brokers. The insurance policy itself has to be reworded to be relevant to the business. Management should seek the assistance of independent commercial insurance consultants or risk experts who are not compensated by commission.
The reason Management needs to reword their business insurance is because on average commercial insurance policies have a very low payout ratio. Meaning they pay out a small percentage of the limit of insurance. This is done on purpose to maximize profits at insurers and it is done legally as well since the business signs up to a faulty contract that is offered by the insurer.
In fact, the average payout ratio is less than 25% on commercial insurance. So most businesses end up paying premiums for years without realizing that if/when a loss happens they will most likely not be able to recoup their losses from the insurance that they had been buying for years.
TIPS
– Hire an independent risk management expert
– Make insurance brokers compete for your business
– Read the find print of your policies
– Link insurance to the operational risk of the business
– Don’t wait until renewal to make changes
Getting Best Outcomes with Brokers
To get best outcomes with insurance brokers, businesses must change their insurance procurement process so that they sign up to terms and conditions that are relevant to their operations, as opposed to terms that benefit the insurance company.
Insurance management services lie at the core of the process, linking the commercial insurance policy to the relevant operational risks of the business. Think about how the insurance policy is created, it is done so by counsel of insurers with disregard to the actual operations of any business. So it is important for Management to change the words in that contract to make tailored to their business operations. By linking operational risk to commercial insurance, Management significantly enhances the relevance and value of the commercial insurance they buy.
Going through the fine print of the insurance policy will also benefit a business if they are buying insurance for compliance purposes. When a business is mandated by regulators to buy insurance, they typically use the summary of insurance (COI) as evidence that they complied with the regulation. However, the wording of the actual insurance policy may not be compliant with what is stipulated within such regulation.
Commercial Insurance Must be Triggered Correctly Upon a Claim
When a loss happens, most businesses claim their insurance by notifying their insurance broker or company. The usually have to fill out a statement of facts and provide information about the loss and then the broker removes themselves and lets the business deal with the insurance company directly.
The insurance company hires a loss adjuster to evaluate the extent of loss that has happened. The loss adjuster and the insurer’s claims team come together to determine coverage. However that process is done within the framework of the insurer, which includes minimizing the claims ratio in order to maintain profitability. For example, if there is a grey area of coverage within a policy, the claims team would be reluctant to offer coverage in order to save the insurance company money.
It is therefore important for the business to have someone represent them during a claims process since the broker is not involved. Moreover, that someone has to be completely independent and looking out for the interest of the business in order for them to be able to push against the insurance company and their loss adjuster.
Examples of Insurance Products to be reworded
Any commercial insurance can be reworded and triggered independently of brokers, insurers, or lobbyists. This includes basis property insurance to more complex liability business insurance.
Liability business insurance includes: D&O insurance, Professional Liability Insurance, Rep and Warranty Insurance, Cyber Liability Insurance, Commercial General Liability Insurance, and others.
Other products include credit insurance, political risk insurance, fidelity bond, and others. There are various commercial insurance products, each of which is dedicated to protecting a specific type of operational risk. It is recommended that Management carefully analyze the type of protection offered by each product, independently of any insurance broker, company, or lobbyist.
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