Insurance is a necessary cost for any business but, in a hardening market, seeing your premiums increase across the board can be a bitter pill to swallow.
A hard market is always a bad time to buy insurance, but combined with the ongoing effects of the Covid-19 pandemic, current market conditions are some of the most challenging that risk managers have faced for quite some time.
We’ve highlighted here some of their biggest concerns, as well as smart tips for rising to the challenge and making that pill not quite so bitter.
1) Navigating the hard market
Increasing premiums will always be of concern for organisations looking to secure insurance cover, but there are things that can help.
Benchmarking against price movements that other organisations are experiencing in your sector is a useful tool for understanding how the cost of your insurance compares to others.
In a hardening market, prices will inevitably increase, but seeing similar or higher increases in other parts of your market can give some comfort.
Having said that, capacity is beginning to re-enter the market in many lines, and this may be a sign that premiums could be about to turn.
2) Commission arrangements
Fixed fee arrangements with brokers are often favourable to commission deals in a hard market, as this prevents a broker having an easy ride to the top, increasing its remuneration just by virtue of prices increasing year-on-year.
Some brokers also have clawback agreements in place, meaning that you can receive some of their commission back as part of the arrangement, which effectively reduces the price being paid for the insurance.
3) Developing relationships
The impact of Covid-19 is expected to persist for some time, which can make it harder to cultivate relationships, particularly with new providers or new members of staff within those businesses.
Some organisations have arranged virtual meetings with a suite of insurers all on one call. But this can often seem like more of a sales pitch to the insurers, with very little engagement back. Arranging one-to-one calls with each insurer often leads to a much more interactive and engaged conversation.
In addition to meeting with underwriters, it is also often useful to meet with heads of claims, particularly if you are dealing with new carriers.
4) Difficult questions
With a hard market comes the hard questions, and many risk managers have said they are facing increased scrutiny at renewal from their underwriters.
The level of questioning from providers is also becoming much more sophisticated (we’ve got a database of questions submitted by members that underwriters have asked them which is available on our Intelligence platform. It’s helping risk leaders better prepare for these tough interviews).
Covid-19 responses and resilience have become common themes of questioning in recent months.
To help with this, organisations should lean on their brokers to find out what the hot topics of conversation may be in advance of any interactions, as well as how best to respond to some of the more difficult questions coming from insurers.