How to balance risk and insurance costs

How to balance risk and insurance costs

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With the current insurance market witnessing significant premium movement and reduced underwriting risk appetite early planning and preparation will make a significant difference to achieving the correct solution that will deliver the most optimal risk transfer program balancing coverage, program design and budget.

Through understanding the challenges of securing optimal protection, you can confidently explore, agree and implement ways to address each challenge, achieving the most optimal risk and insurance solution.

The majority of risks can be transferred to insurers as part of your risk management strategy, whilst others can be managed through the balance sheet depending upon your capacity.

As insurers look to impose changes to the scope of coverage afforded within their policies and change pricing models that impose premium imposts on cover extensions that where once included as standard,  you need to take a closer look at your risk profile, risk appetite and risk tolerance.  Only then can you properly consider the tradeoff between risk retention and reward through risk transfer mechanisms when executing your risk management strategy.

Deeper consideration to proactive risk control incorporating prevention, avoidance, transfer and separation strategies aimed at reducing your risk, maintaining risk transfer cost and ultimately protecting your balance sheet need to be made.

Investigate coverage and insurance cost saving opportunities

You should continuously scrutinise the levels of cover required, as they can regularly change and challenge the way your insurance program is structured in order to maintain the most optimal solution. This may include revisiting suitability of loss limits and the adoption of insurance products that previously you have not considered appropriate or needed, such as trade credit insurance.

There are several opportunities to investigate which could deliver costs savings, including:

Insurance rebates:

  • Undertake Business Interruption declared value reviews and update with insurers.
  • Liability insurance rebates through turnover and operation changes.

Claim insured losses:

  • Prepare and submit claims relating to forced closures from governing bodies.
  • Review and settle outstanding claims.

Reduce insurance premiums:

  • Review your objectives, risk tolerance, risk appetite and risk transfer needs including limit reviews to maximise prevailing market conditions.
  • Re-visit Workers Compensation program design and update employment cost estimations.

Improve cashflow:

  • Investigate the use of Surety Bonds to reduce utilisation of bank facilities and improve cash flow.
  • Utilise Premium Finding solutions to improve cash flow

Refine insurance placement strategies

For risks that need to be transferred to the insurance market, your relationship with your broker and insurers is important.  At HDL we encourage you to meet with insurers to help build a stronger understanding between all parties.

Proactiveness is key to enabling positive discussions and together with your broker you should:

  • Be willing to engage and fully prepared to present your risk exposures and insurance needs to insurers and demonstrate your proactiveness in your management of risk.
  • Highlight how you have responded to impacts caused through COVID-19 restrictions to maintain operations and protect emerging risks, such as health and safety for employees and customers and cyber safety exposures through work at home arrangements and reliance on online trading.
  • Have a clear understanding of your claims history, including claims management procedures, mitigation processes and remediation plans.

Review your current arrangements

HDL provide a complimentary review process where our experienced team help you by exploring all options available and presenting a selection of coverage, pricing and funding options to ensure you are fully protected with the most optimal risk and insurance solution.

Benefits of reviewing your current arrangements include:

  • Challenging the suitability of your insurance coverage
  • Highlighting any gaps and changes in risk profile
  • Understanding policy exclusions and their impact
  • Alerting you to new risks in your operations
  • Ensuring you’re responding to COVID-19-related or other emerging compliance exposures
  • Reviewing insurer suitability and assistance with securing optimal coverage
  • Providing potential savings and cashflow management options 

The information provided in this article is of a general nature only and has been prepared without taking into account your individual objectives, financial situation or needs. If you require advice that is tailored to your specific business or individual circumstances, please contact HDL.

HDL news, updates and publications may contain links to non-HDL websites that are created and controlled by other organisations. We claim no responsibility for the content of any linked website, or any link contained therein. The inclusion of any link does not imply endorsement by HDL, as we have no responsibility for information referenced in material owned and controlled by other parties. HDL strongly encourages you to review any separate terms of use and privacy policies governing use of these third party websites and resources.

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