Five steps to a better insurance deal
By Julian Harlow
Business owners are always on the lookout for ways to cut costs, and insurance premiums can seem an easy target. However, Australians are often warned of the risks of underinsurance and in areas such as home insurance the problem has been apparent following natural disasters including fire and floods. Despite this, there are ways you can reduce insurance costs without putting the future of your business in peril.
Where to start
To get the best value from your insurance you need to first review the cover you already have. Insurance requirements vary as a business grows and changes to your cover may have happened in a piecemeal way over time. Your business may have accumulated overlapping policies that impose unnecessary costs, but changes over time could have also left you uninsured or underinsured in parts of your business.
Lessons from history
The claims history of your business is a good resource for assessing the risks your business faces. Are there measures your business can take that will reduce the risk of similar problems occurring? If so, your business will benefit from the reduction in future disruptions to operations of your business, and you may also be able to ask your insurer for premiums that reflect the reduction in risk.
Cover or budget?
Your claims history can provide further useful information. If certain claims are regular or predictable, you may face lower overall costs by considering them business costs that you need to budget for rather than insure against. One option is to exclude these types of claims from your cover, but another is to simply increase the excess amount for those claims. This will help lower your insurance premiums with the added benefit that you, as the business owner, are given additional incentive to address the cause of the claims.
Manage your risk
Undertaking a proper risk management review of your business will help clarify the risks your business faces, both internally and externally. Looking at external risks such as those your suppliers face and what effect their risks could have on your business will help you decide where your business can be strengthened and give you greater confidence in judging what level of cover you need in areas such as business interruption. Also, the greater transparency there is in the risks associated with your business, the less an insurer will be able to justify higher premiums based on uncertainty.
Demand a deal
The final point is one that is often given, but worth repeating - shop around. Competition among insurance brokers continues to be strong, so it is worthwhile speaking to more than one. If you feel confident that you know what your business requires there are now more options to buy policies directly from insurance companies online. Business owners can also look to industry associations or other business groups for insurers that offer better deals to members.
The importance of insurance to your business means it should never be an area for scrimping, but that doesn't mean you are at the mercy of the insurance industry. Gaining an understanding of your risks and needs is best done by the person who knows your enterprise best: you. And with that knowledge you are amply prepared to search for a better deal for your business.