With professional indemnity rates on the rise, securing a good deal means spending a little extra time considering your options and bonding with your broker. Here is your 10-step guide to keeping your premiums down
There is evidence that professional indemnity (PI) rates for the insurance broking industry is set to increase, being driven by escalating claims and the continued financial squeeze of the past 18 months. Read on for the top 10 tips for brokers looking to get high levels of service and quality security, while at the same time achieving the best possible price.
Don’t skimp when choosing your broker Perhaps this is stating the obvious to a broker audience. But it is important to remember that the money a dedicated broker specialising in the PI arena can save you in the long term will more than offset any additional short-term broking costs. A good broker will strive to identify your insurance needs and broke you the best deal to cater for your individual requirements.
Significantly, an experienced and well-qualified broker will be able to more efficiently manage any claim you may need to make.
Build a relationship
If your broker understands your business, they will better understand your insurance needs. Putting time into introducing your broker to your business costs nothing apart from your time, but it can substantially reduce your premiums.
Well-briefed brokers are better able to deliver a solution befitting your real needs, rather than turning to a standard package that may include unnecessary and costly extras. A valued relationship with your broker will mean that they will be better positioned to identify your strengths and use these to your advantage when broking your risk to the underwriter.
Don’t wait until the last minute
This goes hand-in-hand with the need to build relationships. If you leave it until a few weeks before your renewal date, you are denying yourself the opportunity to develop your broker’s understanding of your business’s changing needs.
Additionally, if you start the process just as your renewal is imminent, you may be forced into making a quick, and possibly ill-considered decision, without the time to research, review and respond to the various levels of cover offered and the implications they may have to your business.
Meet your underwriter
Not only will this give the underwriter the opportunity to build an understanding of your business (and allow them to provide you with a price that truly reflects your underlying level of risk and therefore insurance needs) but, if you do it ahead of the renewal season, both parties will have time to develop a solid working relationship, which will benefit you for future renewals.
Crucially, building a relationship during the underwriting process could save considerable time and effort at the point when a claim needs to be made.
Provide a first-class submission
Provide all the detail you possibly can to explain your insurance needs. By pinpointing your requirements, you will avoid unnecessary add-ins, and by giving full and accurate information, your competence will speak volumes about your business to the underwriters.
Explain a bad track record
If you have a history of claims, provide explanation of how each one arose and, most importantly, how you have sought to resolve the causes. A trend for claims will push your premiums up and limit your market, so ensure that your broker and underwriter can see the risk management strategy you have implemented to strengthen the business against the risks that led to past claims.
Also explain a good one. Don’t assume that, just because you don’t have a history of claims, you will be seen as less exposed. You are more likely be seen as simply lucky, so make sure you can demonstrate the resources you have in place to reduce your business risks, such as in-house legal teams or risk management experts. Taking credit for your best practice can significantly reduce your premiums.
Ask yourself if you could carry a higher excess or co-insure (for example, share a proportion of your own risk and pay 10%). Nothing will indicate to an underwriter more that you are confident that your business is well protected against risk than demonstration on your part to take some of the risk, or pay a higher excess in the event of a claim.
Know the risks
Underwriters will look for factors that are likely to reduce or increase risk, and these will be reflected in your premium. Identify these business drivers and ensure that these are well communicated. For example:
- Robust filing systems or money laundering detection processes would obviously reduce the risks faced by your business. Conversely, the use of a commission-only pay structure for staff would be seen to increase risk and hike premiums.
- Perhaps most surprisingly, business activities that you consider highly positive may ring alarm bells for insurers. For instance, an unexpected jump in fees may be interpreted either as a pro or a con, depending on how it is understood. Therefore proper, clear and full communication is vital if new or changing circumstances are to be properly understood by your broker and insurers.
Ask the commission question
Don’t be afraid to ask how much commission your broker is charging – hopefully your own clients ask you this already. As you are well aware, a good deal may be a clear sign that there is an excessively large amount of brokerage to pay.
The last resort
Demonstrate that your insurance policy is your very last layer of protection against risk. Insurance should be the final line of defence as part of a comprehensive approach to risk management, which will only be activated should all your other systems fail. A commitment to this way of managing your risk will clearly demonstrate that you are well protected and that claims are therefore less likely to arise – and they should consequently be reflected in lower premiums.
David Harries is head of professional indemnity at QBE European Operations.