Insurers’ low-risk policyholders may still experience premium increases amid the hard market, but clients can take mitigating steps, said Ilan Serman, regional president of Ontario at Gallagher during yesterday’s Gallagher Talks session, Anatomy of the Canadian Insurance Market.
“[I had] a discussion with the CFO of one of my clients recently, [who said] …’I am absolutely a better risk than what I was five years ago. The insurance company has made a number of recommendations that we should do and we have observed all of those. We have implemented risk management procedures, we are not in any high-hazard [regions], the products that we make are not high-hazard products, we don’t have a large product liability exposure…and I feel like I am paying the losses for everybody else in this industry.’
“And to an extent, unfortunately, he’s correct,” said Serman. “The insurance markets are much tighter now than they were two [or] three years ago, certainly more than five or 10 years ago. So unfortunately, even though you may be great at risk management…you are going to get caught up in the increased premium environment.”
While these tighter markets may be here to stay for the next 12-to-18 months, all hope is not lost for clients looking for better rates, Serman said.
His best piece of advice is that clients start the renewal process early. Brokers can also encourage clients to close any opened claims to help them get better rates.
“If you have open claims, you should be looking at those reserves because the insurance company takes that as part of your loss ratio. If you don’t think that the claim is legitimate, you want to contest that claim. If it’s a claim that can easily be closed for less than what the reserve is, then make an effort to close the claim.”
Accurate submissions are also important for premium calculations, and that can even extend to accurate client webpages.
“A lot of companies…put all sorts of things on [their] websites,” to help them sell, said Serman. “You should know that your insurance company is going to look at your website. And if they see things on that website that look like they might be more risky…they are going to take that into account.”
Clients must also review and adjust their insured values and business interruption values to account for inflation.
“[Insurers] are looking for fairly nominal [3%-to-5%] property rate increases, but in some cases are looking for as much as 15% increases in your…total insured values as a result of inflation,” said Serman. “If you have not increased the values that you declared for the last two years, you may well be as much as 15% underinsured.”
Clients must also take steps to address any outstanding or unfinished insurer recommendations so that they can be considered the ‘best risk’ to insurers, said Serman. “Either address [the recommendations] so that they are done, or you can have a conversation with your insurance company, about how you might be able to do it in a slightly different way.”
Clients should also revisit their risk appetites and consider whether they can take on a higher deductible. “Maybe you self-insure 5% or 10% of all the losses all the way up,” said Serman.
Other ways clients can mitigate rate increases include:
- Considering alternative structures (i.e., insurance-linked securities, parametric insurance, natural catastrophe bonds, etc.)
- Reconsider remarketing. “If your insurance broker has remarketed your account every year for the last three years, there’s a possibility that insurers are going to see quoting fatigue,” Serman said. “Perhaps you want to take a break this year.”
- Benchmarking: “Get an idea of what the market will bear, get an idea of what your competitors are doing in terms of limits, in terms of deductibles, in terms of pricing, so that you can be in line with everybody else in your industry,” said Serman.
Feature image by iStock.com/William_Potter