By Ryan Hager, Assistant Vice President – Commercial Lines
If I’ve heard it once, I’ve heard it 1,000 times. I’m sitting across the table from a prospective client who wants me to quote their insurance. They want me to go back and go to the marketplace (and approach the same markets their current broker has approached) and bring back a customized proposal that is slightly less than what they are paying now. They see this process as an opportunity to show my value.
What most people are shocked to learn is that this is the least important part of my job and the least effective way to save money. Before you stop reading because you think I am out of my mind (I am, but just not with this), you need to understand how an insurance company comes to their final pricing. There are a few different categories that dictate your final pricing, and only one or two of them is within your control. The factors that are out of your control include the state of the marketplace, global losses, reinsurance costs, your industry and the values of what you are insuring. What you can control are your losses and the way you are marketing your program.
Does your current plan to lower the cost of your insurance go any further than remarketing your insurance? If you are currently relying on this method to control your premiums, I can guarantee you that, yes, you are currently overpaying on your insurance. The only way to take control of your insurance program is to do two things:
- Install Controls
- Change the Process
By installing risk management programs unique to your company’s risk, you will mitigate the insurance company’s exposure to claims, which allows them to be more aggressive in their pricing. The only investment involved with implementing these loss control programs is the time associated with implementing them. Not only will the company benefit from implementing these programs by looking at their bottom line, but at the end of the day, the employees benefit from working in a safer work environment that allows them to return home in the same condition they left it in the morning.
Once you develop and implement the controls needed to help mitigate risks in your workplace, it is time to change the process in which your insurance is marketed. Unfortunately, gone are the days when my grandfather would take an underwriter out to lunch and get a deal done on a napkin. With the advancement of technology, knowledge has become power when it comes to an insurance company’s underwriting guidelines. As a result of this, it is imperative to start the renewal process at least four months prior to expiration and to provide underwriters with a detailed narrative of what controls have been implemented that warrant lower premium rates. When you are marketing your insurance in this fashion, you are putting yourself in the driver’s seat, whereas previously, you were put in a position of being beholden to the marketplace and its rates. Implementing these measures is the only way to see a significant change in the value of your insurance program.