We should be aware that there are questions that we need to answer adequately before renewing our insurance policies.
- Evaluate our renewal strategy: We should know that it is important to examine the commercial insurance cycle, so we may obtain lower premium rates in the future. In any soft market, it should be sensible to cancel our current policy as we want to capitalize on significantly lower rates. If our market hardens, it may be necessary to negotiate for a 12-month or multi-year rate terms. Over a 5-year period, the potential insurance costs for our business can be reduced if we have an excellent renewal strategy. In this case, we will need to pay close attention to insurance cycles, so we are able to act appropriately.
- Evaluate whether we are over-insured: Often we have very little or even absolutely no chance of losing everything in our business in one catastrophic event. Unfortunately, some people still bet that the very unlikely occurrence will eventually happen. This will cause them to over-insurance themselves. If we have three $2 million office buildings and warehouses in the market, we shouldn’t have a $6 million insurance policy. It may result in wasted coverage and the cost can be extraordinarily high, especially in a very hard market. We may need to choose the probably maximum loss to determine our actual or appropriate loss limit. We may need to consider the location of our company and it is better to insure the most important building or warehouse, instead of insuring everything.
- Evaluate our claim history: A good broker should help us in this situation. It is important to know that insurance losses will stay in our records for five years or more. It means that if we have been paid for a large claim, this fact will remain in our records for years. It means that it is possible we will need to pay for higher premiums after the next renewal. Whether we have 1000 or only 2 store locations, the amount of our previous claims will have direct effect on our next premiums. This could happen if insurers consider that we are risky consumers. We have limited knowledge on how insurers determine proper premium rates, but we should be fully assured that previous records will have a direct effect when we renew our policy.
It can’t be overstressed that we need to be partnered with the right kind of insurer. Unfortunately, many business owners don’t really understand their business. However, it is important for business owners to be particularly confident with their situation. We should be aware that insurance professionals are essentially representatives and premium rates are still determined by how we provide them with adequate information. By working insurance representatives properly, we should still be able to stay ahead of the competition. Even if we have completed the renewal process and obtained proper premiums; we should maintain an open dialogue with insurance representatives.