Spending your money differently

Written by Alison Waters, Commercial Placement Manager.

Managing operating costs to ensure that profit margins remain strong is fundamental for every business. Insurance premiums are just one of many expenses to factor in, but is your money really working for you in the way that it should be – to cover the biggest risks to your business? Are you instead just continuing with the cover you’ve always had year after year in the hope that one day the cost might reduce?

A good insurance broker will take a step back and assess the covers you have versus the covers you need. If you haven’t reviewed your insurance for a while, you might be concerned that increasing limits, upping sums insured or taking out additional policies will mean spending even more money. Often though, there are ways of simply re-engineering what you spend to ensure it does more for you, perhaps even making your coverage more appropriate for the modern-day risks that businesses face.

Take for example a company that makes components for electrical equipment. Their fire risk is low, and their raw materials are not in any way theft attractive. They aren’t located in a flood area, and they have only ever had a couple of claims for accidentally damaged office equipment.  

They are paying £50,000 for their property and business interruption insurance, with a standard £500 excess.  They know they need to buy a cyber insurance policy, as they’ve read that this is one of the biggest threats to SME businesses in the current climate.  Their budget is tight though, and they can’t really find the extra £3,500 they’ve been quoted for the cover.

Their new broker has a look at their current property and business interruption policy and talks to them about increasing their policy excess (sometimes referred to as a deductible) given they hardly ever make a claim. She talks to the insurance company, and they advise that they can offer a 7.5% reduction in premium (£3,750) if the company increases their policy excess to £10,000.

This makes sense to the customer.  Experience says they are unlikely to suffer high volumes of losses on the property policy, and the savings they make here can fund the cyber insurance, which is far more relevant to their most pressing risks as a business.  

This is just one example of where a good broker can help you analyse your risks differently and provide coverage that is tailored to your specific needs.

There are other ways that savings might be made too, to allow cash to be freed up to spend elsewhere.  The following are some examples that your broker might be able to negotiate for you:

• A regular re-market exercise, perhaps every third year, to generate additional competition for your business, which can potentially find savings by moving insurer, or encouraging your existing insurer to review and reduce their rates to reward loyalty.
• Negotiation of low claims rebates, which allow you a share in your own profitability – with a potential return of up to 10% of your premium, provided you renew your policy with the same insurer.  This money can be spent on additional covers or upping limits.
• Rate stability agreements, allowing you to budget effectively for more than one year, which will give you the confidence to add relevant covers knowing that your existing insurance premiums should remain stable.

It is always worth talking to an expert, and this is where a good insurance broker can add so much value to your business. If you want to see if we can help you find some savings and tailor your insurance to your needs, then call us on 0330 008 1334.