Rising Insurance Premiums - How to Prepare your Business
How do Australian Businesses prepare for rising premiums for 2020/21?
By now you would have noticed that you and your colleagues are currently experiencing an increase in annual insurance bills, and are wondering what for? When you consider that many businesses have maintained nil claims and have continued strong risk management, it becomes a little confusing to make logic of the market situation.
But when you consider the national disasters which we have experienced this year, with regards to the bushfires, floods/storms and COVID-19. It becomes evident that this is a substantial loss for the insurance industry, from an Australian macro approach. To make matters worse, the royal commission has revealed that there has been a large increase in class actions against businesses. This has resulted in a huge amount of claims against Directors & Officers, hurting liability markets.
6 Things your company can do, to mitigate hefty premium hikes for 2020/21?
(Point 6 - Most Important)
1. Build a relationship with your local insurance broker/adviser Building and maintaining a long-term relationship with your insurance broker/adviser helps them understand your business needs. This means that they can secure the best cover for your business and advise you on potential future changes to these costs.
2. Maintain a safe workplace Training your employees on new equipment and keeping OHS sessions up to date will help SMEs reduce the likelihood of on-site accidents and lower their overall risks. Less risk means lower premiums, so it’s a win-win situation.
3. Keep comprehensive records It’s vital that all businesses maintain records of employee training and equipment maintenance. Businesses that maintain good record keeping and have an up to date risk mitigation program can often benefit from discounted premiums from their insurance providers.
4. Know your business risks If you have ignored one or more potential risks, your business can potentially suffer devastating consequences from a lack of insurance cover at some time in the future. This is why every business needs to identify their risks, review them regularly and speak to an experienced insurance adviser who can provide suitable on-going coverage.
5. Review your insurance needs Not purchasing insurance or purchasing inadequate insurance is not the way to reduce your costs. In the end, this strategy can cost SMEs their livelihood, so it’s a good idea to reassess your insurance needs before any potential increases occur. A good insurance provider will know what types of insurance coverage your business needs.
6. Foster the long term relationship with your insurer (2-way relationship) -
If you have been loyal to your insurer, it is very important to stick with them now. Being able to leverage years of built-up premium will assist your business to gain a better deal, in a sustainable manner for future years.
It is important to note that alternative insurers may offer businesses a better deal initially to switch, but this generally is regarded as buying your business for the first year. What happens after year one is generally not pretty. Therefore, if you have been with an insurer long-term, hold that relationship and just understand that over the past decade they have supported you with competitive deals, now they need your assistance for this year. Insurers will look more favorably on companies that stay loyal through this tough period.
For this (2-way) tactic to work. It is imperative that your broker/adviser articulates the expectations of loyalty to the insurer. Brokers/advisers need to state that if their client supports their current insurer, there is an expectation that this will be favorable in the future, ensuring all parties win. Changing brokers/advisers, but staying with existing insurers sends this message loud and clear to the market.
General Advice Warning The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it.