Excess levels are out of date so take a bigger risk and save money

Developing a distinct and persuasive sales proposition is essential for every business. So why not astonish your commercial prospects and clients (and competitors) by announcing that you want them to buy less insurance? That should at least get you in front of the finance director, where you can really start to make your case.

We're not talking about under-insurance. This proposition is much more constructive: it suggests that clients should improve risk management and accept a more realistic level of risk themselves via the policy excess. It argues that they should transfer to an underwriter only the larger, unpredictable losses that could have a serious impact on the balance sheet.

The level of excesses has singularly failed to keep pace with inflation, remaining around the £250 mark for more than 20 years. And the same level is applied regardless of the turnover of the company, its industry sector and its appetite for risk. That makes no sense.

We often complain that insurance buyers only consider price. But if we all sell the same package of standard cover and excess, is it surprising that the competition ends up focused on this one aspect of the offer? Shouldn't we be more professional and deliver a more sophisticated proposition?

It is a simple fact that, with a low excess, the insurer often pays out a lot of small ticket claims - all of which are big ticket, expensive administrative chores. In other words, a low excess encourages premium/claim `pound swapping'. Where's the sense in that?

A higher excess implies the insured must carry the cost of these low value claims, but why not help eliminate them through risk management? That saves money and inevitably improves efficiency.

With a realistic excess - and it's the professional broker's job to work out what is appropriate to each client's circumstances - a worthwhile reduction in the headline premium can be negotiated. And if your relationship with the insurer is as good as it is with the client, then the exercise shouldn't have a negative impact on your earnings. But it will mark you out from the crowd and confirm your professional standing in the market.

All you need to do now is find an underwriter that is ready, willing and able to discuss how to put the concept into practice.

  • Kevin Pallett is managing director of Fusion Insurance Services