If you’ve just experienced a difficult renewal period or have been warned to expect significant premium increases by your broker, you are in a similar position to many of the insurance buyers we speak to on a daily basis.
All too often the conversation with their broker follows a familiar path. Without much warning you will be told to expect rate increases of between 20% and 200% (in one case we have seen, 500%), there are no alternative options, and you should count yourself lucky ‘because I’ve got five or six clients in an even worse position’.
Explaining all of this to a CFO who isn’t immersed in the detail of the insurance market and its dynamics can be an especially difficult task for an insurance buyer. After all, there are few other products that witness such extreme swings in price. And, while price increases might be the headline issue, you may also have to consider a range of more insidious reductions in coverage, lower limits and more exclusions. Your CFO will naturally want to know what you can do to mitigate the situation.
What can you do about it?
Even a good, proactive broker will be looking at a book of business that is all suffering the same problems. The buying power and leverage that sits at the heart of every broker’s proposition will be split across that book – and often focused on the most distressed cases, which may be struggling to place risks at any cost. To get the most out of a broker in these circumstances you will really have to push them. But how do you go about doing that?
The key is to ask the right questions:
- How many other insurers have they approached as alternative markets and how were they marketed to? Can you see a full report of who they met (and when) along with the reasons those underwriters were not interested?
- What questions did the competing insurers ask about your company, risks and claims experience? Can you see a full copy of the answers the broker gave to these questions?
- What alternative programme structures were considered in order to mitigate the price increases? Were different packaging options looked at?
- Have there been any changes to the coverage itself? Were new exclusions added or existing ones amended? How do these sit alongside your risk analysis and loss modelling?
And above all, you should enquire as to whether your broker has put together a plan for the next twelve months to ensure that your next renewal is more effective. Especially in a hard market, buying insurance is also about “selling” risk.
If the answers to any of these questions is unsatisfactory, or not complete enough to satisfy your CFO, you need a different strategy.
At Mactavish, we take the view that insurance is much more than a commodity – however heavily it is marketed as such. At the beginning of every client engagement we strive to build a bottom-up understanding of our clients risk profile so as to de-commodify the risk and present it as a unique opportunity. This empowers the companies we work with to take control of the placement process and drive better outcomes.
We also work hard to create a truly competitive market for client risks. This often involves creative and imaginative approaches to market and broker management. The results can be highly significant – improvements in quality and reliability of coverage and considerable reductions in premium.
If the scenario we outlined above is familiar to you and you’re looking for support, we’d be delighted to discuss how we can help. Unlike most brokers, we derive none of our income from insurers and no commissions on rising prices – so are able to offer truly independent guidance built around your needs and no one else’s. Download our guide to find out more.
Liam Fitzpatrick
Client Services Director
