It is no secret that the operating costs of businesses continue to rise, from increases in labour costs, raw materials, shipping and the energy crisis, and businesses across all industries are contending with challenges to their balance sheets.
And when the company insurances fall due for renewal, there is sometimes pressure to maintain, or potentially reduce, expenditure in this area.
Whilst testing the wider insurance market can benchmark whether your existing programme is competitive, there are some pitfalls to avoid when considering potential savings and reductions across your insurance programme:
– Limits of Indemnity: We have seen significant increases in payments for life changing injury claims in the last three years. In the event of a catastrophic third-party property damage or bodily injury claim, the business could find itself self-insuring for millions of pounds if they reduce the limit of public, products or employer’s liability purchased
– Unrated insurers: Insurance capacity is sometimes available from unrated insurers at a cheaper premium, however, unrated insurers can pose a greater risk because they have not been subject to a financial strength rating and may not be subject to UK or EU insurance regulation. This can present a greater risk of the insurer failing and claims not being paid which could leave a policyholder uninsured for losses they were expecting an insurer to respond to
– Indemnity period: Your indemnity period is the amount of time an insurer will compensate your business interruption losses and is generally set in periods of 12 months upwards. Whilst reducing your indemnity period will yield a premium saving, lead times on stock, raw materials and labour are significantly impacting the reinstatement times of buildings, machinery and work in progress. At a time when a saving is tempting, it could be catastrophic to reduce a business interruption indemnity period in the current economic climate.
– When considering the structure of your insurance programme, without compromising on the financial security of your insurer, the limits and sums insured purchased or the claims service of the insurer when you need it most, some areas that may create efficiency in your insurance programme include:
– Increasing your excess: Premium savings may be available in exchange for a higher excess. However, policyholders must be mindful that the excess will apply for the year and so the balance sheet needs to be able to manage these self-insured costs which, depending on claims frequency, could occur once or several times in a policy period
– Excess layers of liability: Splitting limits of liability between insurers can be an effective way of reducing expenditure. Liability claims infrequently exceed the initial millions and so excess limits of liability are often available at lower premium rates than the initial layers of indemnity
– Instalments: Could off-setting the policy expenditure across several instalments improve your cash flow? Insurer direct debit facilities or premium finance options can facilitate spreading your premium costs
If you are concerned about the efficiencies of your insurance programme, please contact Towergate Insurance Brokers on 01604 887300 or email northampton@towergate.co.uk
Towergate Insurance Brokers is a trading name of Advisory Insurance Brokers Limited Registered in England No.4043759.
Registered Address: 2 Minster Court, Mincing Lane, London, EC3R 7PD Authorised and regulated by the Financial Conduct Authority
