Opportunity knocking?
It is astounding how many Brokers, Insurers and Underwriting Managers unknowingly or by accident or perhaps by omission discard or ignore precious premium income and its concomitant commission income. In the current fiscal wilderness it could prove to be a lifeline to profitability or indeed financial survival.
Where do you find this income?
The “lost” income is to be found in the Insurance Covers that are subject to premium variations where such variations are based on declarations regarding Sales, Purchases, Wages and Salaries during or at the end of the Period of Insurance. The types of Cover we are referring to are in the main, but not always limited to:
Business Interruption
• Gross Profit Sum Insured based on optimistic calculated estimate.
• Premium based on a realistic percentage of the Annual Premium.
• Adjusted annually after extracting the true Insured Gross Profit from the Annual Financial Statements.
Fire Policy
• Stock Sums Insured – based on realistic maximum.
• Ongoing adjustments based on actual at agreed points in time during period of Insurance.
Liability Cover/Products/Defective Workmanship
• Premium based on Turnover/Sales/Salaries and Wages adjusted annually at end of period of Insurance.
Transit Cover
• Premium based on value of “carriage” adjusted at agreed points in time during period of Insurance.
Personal Accident/Stated Benefits
• Premium based on Salaries/Wages adjusted annually at end of period of Insurance.
Contractors All Risks
• Premium based on actual value of contracts as demonstrated at end of projects.
Spin off?
Dodging Average, in particular, in respect of Business Interruption and Stock in Trade Cover by getting the “Value at Risk” correct.
Fending off attacks on Clients by competitors
• Insured actually understands the flim flam contained in competitive quotes by appreciating precisely how their premium is calculated.
Managing Risk in respect of Personal Indemnity exposure.
Business Interruption
• By focusing on the Gross Profit Sum Insured the correct premium is obtained at the outset. The adjustment at the end of the period of Insurance becomes a mere sweetener. It is truly astounding how often the GPSI is found wanting when measured against the Value at Risk. Underinsurance of between 15% and 25% seems to be par for the course. We recently came across an Insured that was 95% Under Insured. The core reasons are generally the failure to account for future growth in Sales/Expenses during the period of Insurance as well as projected growth during the period of Indemnity and the omission of VAT.
Helping hand
Especially, insofar as Business Interruption is concerned, it is appreciated that not all Broker/Insurers/Underwriting Managers have the expertise to do the extract of the Insured Gross Profit from the Annual Financials and interrogate the future factors that may impact on the VAR. We at Fivaz, Ogle and Associates would be delighted to assist in this regard. In particular in providing assistance at arriving at realistic Values at Risk. Especially, as we are licensed FSP’s and thus able to provide advice coupled with the fact that we are not “Brokers” and therefore do not pose a competitive threat. (Our skills profile may be found at www.fivazogle.com and Linkedin at A.J.E Fivaz).
