Jurgen Hellweg, CEO of Western National Insurance.
To adequately protect yourself and your company in today’s business environment, you must accurately assess the risks your business faces, and choose your insurance cover accordingly. There are many types of business insurance policies available offering a broad spectrum of insurance protection from equipment, property and buildings, to business assets, liability and business interruption insurance. Your business may require more than one - or a combination of policies - to suit your company’s needs.
The price of your policy will be determined, like all insurance, by risk versus likelihood and the potential severity of the incurred loss. It’s important not to think of your insurance policy as an all-encompassing safety blanket, as this kind of rationale can radically increase costs.
A way to simply demonstrate this is by looking at a Golf GTI driven by a 19-year-old student versus the same vehicle being driven by a 50-year-old businessman. The student is a higher risk and so his insurance costs will be significantly higher than that of the businessman.
It is therefore safe to say that the price of your businesses insurance will be based on the nature of your business, in which industry you operate, services you offer, or which products you handle.
While there are many factors that affect the costs of your business insurance, nevertheless there are just as many precautions that can be taken to keep costs low.
Below are 8 tips to make your business insurance policy work for you at a price you can afford.
Behave as if you are not insured
This is the best advise you will ever be given when it comes to insurance. Clients who act as though they are insurers will actively implement risk management measures to reduce any potential impact on their business when a loss occurs. They might consider an armed response alarm system, reducing the time a burglar will have to get away with goods. They may implement better stock control measures to reduce losses. They will make sure their fire extinguishers are regularly serviced in case of a fire. Thinking like you are not insured makes you more risk aware and encourages risk reduction processes and measures. Insurers will recognise these measures and often discount your premium.
Consider the things that can put you out of business
Cover these risks adequately and don’t skimp. The cost of insuring against your business burning to the ground is generally cheaper that insuring your laptop.
Generally, don’t sweat the small stuff
Items like cellphones, for example, are very costly to insure because they have a high frequency of loss, which essentially pushes up your premium.
Implement thorough internal controls to reduce and manage potential loss
This could include making employees accountable and aware of their responsibility to your company.
Consider higher excesses
This will bring premiums down quite a bit. You may find that keeping a reserve fund to cover an excess, should you need to claim, is a better system for you, saving money each month instead of paying a premium for lower excesses. This will of course be determined by the financial position of the business and how you manage your internal controls.
Maintain your assets
Insurers will often inspect the risk they are taking. Well-maintained assets that may be risks will not incur any additional improvement costs and are well-respected by insurers. Insurance companies seeing this sort of result, will be more reasonable on pricing.
Take your insurer’s advice on improvements
Your insurer may, however, recommend some improvements. By making these improvements, your risk will be reduced, and your policy cost will decrease.
Partner with your broker
Last, but certainly not least, your broker needs to understand your business, its financials, and what kind of a risk taker you are. These are the factors that drive your insurance costs up or down.
Taking these steps can really help keep manage your business insurance costs and as your policy will be simplified and you will be covered for exactly what you need.
Get the latest issue of FAnews