Listen, we understand the frustration of trying to keep insurance costs down for your business only to be hit with a ridiculous premium increase during renewal season. You can acknowledge that your current insurance buying process has been headache-inducing, especially when it impacts you and your business.
And doing nothing about how you buy insurance won’t keep your costs down.
At ReNu Insurance Group, we’ve helped over 130 businesses change how they buy insurance, whether it’s finding alternatives inside or outside of the traditional market.
After reading this article, you’ll understand how the insurance industry influences how you buy insurance, why they make it complicated, and whether you should change how you buy insurance. That way, you can be on track to figuring out insurance alternatives that will benefit your business.
Why is buying business insurance such a hassle?
Plenty of insurers are trying to make it easier to go online and customize your coverage. Unfortunately, that’s a challenge for businesses mainly due to the endorsements the carrier throws in. It might benefit them, but not you. You might be at a disadvantage if you don’t understand the contract language used in an insurance policy.
Be wary if you’re buying insurance on your own.
While the insurance industry tries to make it easy for you, it comes at its own costs. For many of the insurers you’re familiar with, many of their easy-to-access policies are stripped down. You won’t know any different, and you’re left without protection. And there’s no culpability.
For example, if you pay for a policy that doesn’t cover uninsured motorists, it’s cheaper. Of course, it is cheaper because the carrier is relieved of a lot of liability. But if you or one of your employees gets into a car crash where the other person is uninsured, you best hope you have the funds to cover any damages.
The point is you have to know what you’re buying.
From a large business perspective, most of the underwriting done for middle-market businesses is online. Information is put into a portal that will determine your policy. They’re using the information provided on standard insurance applications to come up with a premium, even though they’ll never see you. At most, you’ll have a phone call with a loss control person who checks a few boxes.
The insurance industry has moved to more automated underwriting with little or no input on identifying best-in-class businesses. It’s more cookie-cutter than ever. Your business will never get an actual review of your risk profile, meaning the carrier will NEVER give you a better deal even though you manage your risk better than anyone else.
Does the insurance industry make everything complicated on purpose?
As we said earlier, the industry is trying to make it less complicated for you to buy insurance. Unfortunately, doing so makes everything else more problematic. They’re trying to put a computer in front of you and your policy.
You’re asked all kinds of different questions in exchange for a faster turnaround time, which comes off as a disservice. They don’t expect you to know all the jargon in their contracts. And chances are clients will go with the cheaper policy they don’t fully understand.
But at least you save money, right?
Not every underwriter does what’s being described. Unfortunately, it does happen the majority of the time.
Why would I want to change how I buy insurance for my business?
If you haven’t changed how you buy insurance over the last 15 years, you probably owe yourself the ability to look at something else for the needs of your business. If you’re looking at insurance as a transactional deal and taking renewal increases as they come, are you doing yourself a disservice?
What have you changed that would make an underwriter give you a better deal? If you go to ten different insurance companies every year to see who has a better deal, you’re just playing a price game. Will that change how your risk profile or claims are handled?
(Spoiler alert: No.)
And look, don’t worry if you have never thought about how buying insurance can never change. Thankfully, there are plenty of other options to look at.
High deductible, Self-Insured Retention, Retrospective Plans, Self-insured through captives, etc.—are other options to consider depending on how much risk you want to tolerate.
Taking on more risk is not for everyone. If you’re happy paying more to your insurance carrier so you never have to think about your insurance again, more power to you.
(Legitimately, that isn’t sarcasm at all. If that’s how you prefer to deal with insurance, that’s perfectly okay.).
Here’s a graph that can help you determine multiple options for what might work best for your business.
If you’re looking for more financial control (X-axis) over your insurance premiums, the guaranteed cost route might not be in your best interest. However, it does mean you have to have more program control (Y-axis) over your business's safety and risk management. It depends on what you’re willing to pay and the risk you’re taking on.
How do I switch up my insurance plan?
It depends. Are you willing to take on more risk to lower costs? If you’re prepared to own your results and minimize claims, you can consider high-deductible plans or self-insured retention. However, this still gives the insurance carrier power over claims.
Are you willing to take on more risk?
Ultimately, it depends on which side of the coin you want to be on. Do you want to take on more risk? Or do you want your insurer to cover all the risk?
If you plan to stay in the traditional market, you need to read our article on Insurance Strategies for Business Owners in a Bad Market. You’ll learn more about alternatives such as high deductible plans, retrospective plans, and self-insured retention. You’ll also learn about captive ownership.
If you have any other questions, you can schedule a call with one of our insurance specialists at ReNu Insurance Group.
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