Achieving the best outcome with your business insurance
Australia is a land of uncertainty when it comes to insurance.
The recent floods, bushfires and cyclones are proof that no one is immune to the forces of nature, not to mention the many internal incidents that prevent businesses from working at full capacity each year. The insurance market continues to harden in Australia and while this creates challenges for all businesses, it also gives brokers an opportunity to truly support their clients and secure exceptional outcomes that would not be possible without that same level of experience or in a direct market.
As a long-standing business in the Hunter Region, Aon’s Newcastle branch has supported local businesses through these conditions time and time again. While our strategy changes slightly each time the market shifts, overall there are some key learnings on how businesses can help prepare for these changes and help limit any volatility they would otherwise be exposed to.
The only way to secure exceptional outcomes in such challenging circumstances is to engage with your markets well before renewal time. With capacity reducing rapidly in some markets and remedial underwriting alive and well, the best action to take is to be proactive. Late delivery of information leaves underwriters little time for review or negotiation internally meaning the offering will either be more expensive or declined all together. It also limits your options for alternate markets, with other insurers showing little interest if they’ve achieved their new business budgets, or have no capacity left to offer. It’s all about selling your risk to the insurance market and unfortunately, this does take time.
Invest in your insurance program
In this market Underwriters will look more favorably on any business that is willing to invest in improving their overall risk.
Undertaking activities such as insurance valuations, independent risk surveys or simply proactively complying with any risk recommendations will act as a demonstration of your overall attitude towards risk, thus making you a more attractive risk for the insurer’s portfolio.
Understand your market
Understanding the market will ensure you are better placed to prepare internally so you can limit the impact on your business both operationally and financially. Some considerations for the balance of 2019 include:
• Directors & Officers
With the evolving class action environment and the increase in litigation funding, the D&O market is struggling to accurately model future premium requirements across the country. Aon is seeing steady increases in the SME space, while for the ASX200 the average increase is over 100%. To help limit the trajectory of rate change, businesses should be prepared to proactively demonstrate how they manage their continuous disclosure obligation, their financial position, any M&A activity and what their debt profile looks like.
• Statutory Liability / Management Liability is a market which should be watched closely over the coming 12 months with many factors influencing coverage and pricing, including:
- Increasing fines for WHS breaches, which could leave companies exposed if their policy limits are not reviewed.
- The ongoing review into Industrial Manslaughter charges which includes recommendations for prohibition against insurance for WHS fines.
- Pollution of the Management Liability market with policies offering additional covers that are not intended for such a risk e.g. Crime Cover.
Each of these items continues to place pressure on underwriters to either carve out cover or review their rating structure.
• Workers’ Compensation
With recent data showing significant deterioration in the scheme now more than ever it is crucial for NSW businesses to understand what is driving their premiums. Take note of how you are classified, the strategy on any open cases and finally, be across which claims costs are being utilised in your calculation. These factors are important to understand and will help you gain certainty around your spend and potentially, identify areas for savings.
A price check is not a health check
During times like these we see many businesses lured into Health Checks that guarantee a reduction in spend. While this sounds appealing, it can be fraught with danger. Any review of your program should not be driven solely by a quest for lower premiums. Ensuring good financial value is important, but your broker should also check your policies comprehensively to identify potential gaps and ensure all insurable risks are covered.
Where necessary, they should involve qualified professionals, such as engineers, forensic accountants or insurance property valuers. A robust health check usually includes evaluation of
- All policy terms and conditions
- Adequacy of the sum insured, deductibles and premiums
- Specified limits and sub-limits for all insured risks
- Physical risk exposures with assets, contracts, liability and people
- Risk tolerance and mitigation strategies
A good broker can then use this information to help you achieve a price that is palatable, but also provides peace of mind.
Partner with your insurance broker
Believe it or not, the “Help me - Help you” moment from the 1996 Jerry Maguire movie has enormous relevance to the broking profession. As the person entrusted with the protection of your business, your broker wants to succeed, but without partnership it is a difficult road. Being open to sharing updates, providing information and importantly making time to discuss your program are some key steps you can take to ensure your broker is working with your business, for your business.