Don’t accept premiums as if they just fall out of the sky. Here are some ideas to help you take the initiative. For many people insurance premiums are controlled by mysterious market forces beyond their control. All they think they can do is shop around for the best deal, which is always a good idea, but there are in fact a number of things you can do to influence your premiums regardless of which insurer you choose.
There are two main areas you need to think about: Cover and Claims.
First, take a good look at cover, i.e. what and how much you are insuring, as you do not want to be paying for anything you do not really need.
There are usually four elements to this:
- Excess – the amount of each claim, which you, not the insurers, will pay. Increasing this should lead to a reduction in premiums. How big an excess you should have depends on how much you or your business could afford if there was a claim.
- Limit – a maximum that insurers will pay, either for each claim or in total for any year: the lower the limit, the lower the premium. The right limit for you depends on how likely it is that you will have a claim above that level, and how damaging it would be to your business.
- Exclusions – things the policy does not cover. There should be a reduction in premium for each exclusion. There is no point in paying a premium to cover an event that is not possible in your circumstances e.g. demolition work, if you only build or repair property and never demolish any.
- Extentions –the opposite of exclusions: non-standard items added to your policy, at extra cost. Do you need them?
If this process results in higher premiums, because you decided to opt for more cover, you should still see it as a saving, if you compare the extra premiums with what an uninsured claim might cost. Real waste usually occurs when you are paying for more insurance than you need, not when you make an informed decision.
Then have a look at claims, as the more claims you have, and the more they cost, the higher your premiums will be, and insurers are interested in possible future claims as well as actual past claims. There are two ways of reducing the number and cost of claims: claims management and risk management.
Claims Management is worth thinking about for every kind of insurance but it is really important for liability policies, i.e those which pay for claims brought against you by people who blame you for injuries or damage they have suffered.
- Make sure you have a system in place that will work for you, whether you do everything yourself, rely on your insurers, or employ some specialist firm of claims handlers, and be sure someone deals with each of the points listed here:
- Notify your insurers as soon as you know a claim is likely to be made even if you do not have all the facts they will need, but send the rest as soon as you can.
- Comply with all instructions and requests from your insurers. If you do not they may be have the right to refuse to cover your claim, and anyway they probably have a good reasons for their procedures.
- Get all relevant information together as soon as possible – it is surprising how soon details get forgotten or documents lost.
- If someone brings a claim against you make sure it is properly investigated as quickly as possible so as to decide whether to pay it or not. Trying to defend what cannot be defended is a waste of time and money, but so is putting off a decision.
- If you have any suspicion that a claim against you is fraudulent, make sure someone looks into that aspect too.
Some people would say that this includes everything covered in this article and a lot more, and they may be right, but what I mean here is how to control the causes of the fire, accident or whatever, which led to the claim.
- Make sure you get feedback from insurers, investigators, or claims handlers as to the reasons they believe it happened and what they think could be done to prevent it happening again. Try to find out how often such incidents occur, whether they lead to claims or not, in deciding priorities.
- Once a year, look over all your activities and see where there are possible risks, even if nothing has gone wrong so far. You may find it worthwhile having someone else look at them with you, as it is very easy to miss the obvious when you see it every day.
- List options for controlling each risk and pick one or more which you think will work best for you, taking into account such things as the cost of the control measures and the possible cost of a claim and its effects on your business.
It is important that you spend some time thinking about each of the points in this article, and especially that you then act upon them, if you want to take at least some control of your insurance costs and not let them just seem to drop on you out of the sky.