Insurance Inspect
Think like an Insurance Seller….to be a good Insurance Buyer!
Buying commercial insurance is not the same as buying your personal insurances (for your car, your house, etc):
| Consideration | Buying Personal Insurance | Buying Commercial Insurance |
|---|---|---|
| Data Provision | Can answer questions over phone | Specialist application/proposal forms |
| Route to Market | Use price comparison website, Can choose cheapest, All products broadly the same | No price comparison websites, Products usually bespoke |
| Insurer Failure | Covered by FSCS in event of insurer failure: insurer security not important | Limited FSCS coverage for companies and charities, none for public bodies |
| Brokers | Rarely need a broker | Most insurers insist on using a broker; mandatory for using Lloyd’s syndicates |
| Policy Terms | Policy terms broadly standard across insurers | Terms usually bespoke to each risk |
| Premiums and Negotiability | Premiums perhaps £1000 max, Sometimes negotiable, but not by much. A 1% premium reduction is usually less than £10, often not worth the effort | Premiums typically £1m+ IPT alone can be £100k extra cost. A 1% premium saving is usually a £12,000+ cash saving, thus worth negotiating |
| Additional Products | High up-sell rate of high margin add-ons eg legal expenses cover etc | Some up-selling (eg risk surveys), but far less frequent |
What if there is a better way (to buy insurance)?
What are the implications of not knowing?
What is it that you might not know?
Better ways to finance risk
Significant “hidden trends” in your existing claims data
Significant public information on insurer asset quality
More insurers available/Better products available (or designable)
Cheaper prices available (or more negotiable than you are aware)
What are the implications of not knowing?
Inefficient Business Costs: Overheads too high (but you are unaware of this)/ hence uncompetitive
Council/charity activities etc curtailed unnecessarily?
Your job security – may be at risk if you are not up to date
Fear of following the herd – being out of line re benchmarking XS/AGGs etc
| Step | Your Key Information Needs |
|---|---|
| Your Past | What can you learn from your past? How much profit have insurers made from you? |
| Your Future | What can happen in your future? How likely are large claims really? What’s the best way to pay for them? How material are they to your balance sheet anyway? |
| Your Custom Made Product | Is an off-the-shelf policy right for you? What are the alternatives? Why insure in the first place? |
| Your Best Providers | Is the brokers’ panel comprehensive enough? How much are they being paid? What if you need a bespoke solution? |
| Your Money | Where does your money go? Offshore? Tax Haven? Who is your actual insurer? How solvent are they? What is the security for your claimants? |
| Your Review Process | How do you know that you made the right decision? What information do you need? What are you going to do at the next renewal? |
