When you’ve been covered by the same insurance provider for the last five years with no claims, only to see an increase in your renewal, it’s no wonder you feel like you’re throwing your money into a bonfire. No matter what you do to keep insurance costs down, you’re constantly bombarded with higher rates every renewal season.
Certain types of industries affect the insurance market, and they always vary. It depends on market cycles and where the insurers are seeing a financial loss. You can’t predict it, unfortunately. What you can do is figure out alternatives to lessen your frustrations when you feel like you’re out of options.
ReNu Insurance Group understands your frustrations, especially when the 130+ captive members we’ve worked with have had similar issues when they were part of the traditional market.
In this article, you’ll read about other options you have when you feel like you’re in an awkward place within the traditional market. That way, you can be closer to figuring out the best way to cover your business, whether you decide to stick with the traditional market or seek alternative options.
Traditional insurance market alternatives to consider
Have you tried retrospective plans?
Retrospective insurance plans are used in property and casualty insurance. The insured pays an estimated premium initially, and the actual losses are assessed after a period. The premium is then adjusted to reflect real loss experience. If losses are higher than estimated, additional premiums will be required, and vice versa.
Retrospective plans align insurance costs with actual claims, often used by businesses with changing risk profiles.
Have you tried high-deductible plans?
If you think you’re good at managing risk and are willing to take on more, you can raise your deductible. Sometimes, the carriers will require collateral because they’re taking credit risk. The business would see a lower premium in exchange for taking on more risk.
The insurance carrier bills you for the deductible on each claim. Some plans offer an aggregate deductible, which caps the out-of-pocket expense. We see this with medical stop-loss plans and workers’ compensation policies.
You still might see premium hikes upon renewal season with a high deductible plan. It's up to you to decide if this type of insurance plan is worth it for you.
Have you tried self-insured retention (SIR)?
Self-insured retention (SIR) is the amount an insured party, often a business, agrees to pay for covered losses before insurance kicks in. The carrier has no credit risk. They don’t pay anything until you do.
SIR is part of self-insurance, allowing businesses to save on premiums but requiring financial resources to cover losses up to the SIR limit. The specifics of SIR can vary based on the insurance contract and the organization's needs.
You see the drop in premiums balanced with the increase in your risk. You take on more of the risk so that the carrier charges you less.
You can weigh out the cost benefits of each of these options while in the traditional market. Ask yourself, “Is it enough of a difference to positively affect my cash flow?”
Negotiate with your current insurance carrier
While this option might not go anywhere, it doesn’t hurt to try, especially if you don’t want to leave your current provider.
You’re basically saying, “Hey, I want to stick with you guys, but I need a better deal. I’d prefer not to shop around. However, I will if I feel I need to.”
The insurance industry’s dirty secret…
Do you know why it’s so hard to shop for insurance? The real reason is the insurance industry doesn’t want you to.
The traditional market only allows one broker to talk to one insurance company for a particular insured at a time. You may not be aware, but many brokerages “block the market.” That means they’re submitting applications on your behalf to as many carriers as possible. They’re ensuring that–by chance, you decide to shop the market with someone else as a comparison or you think you’re keeping your agent honest–they would eliminate that agent’s opportunity to find another option for you.
All this does is piss off the insurance industry underwriters. They know after the 5th or 6th time, the account isn’t going to move to their carrier. This is especially true with large accounts ($250,000 or more in premium). They’re doing work for nothing.
Many large brokerages have teams that submit applications to carriers to prevent other agents from trying to get your business.
If you’re not planning on moving from your current carrier and continue asking an underwriter to look at your account every year, they have to stop what they’re doing to look at your files. If you’ve gone five years without moving and are going on your sixth, they won’t be all that interested in your account. This is especially true with insurance policies that renew on January 1st of every year.
It’s a silly practice that puts you in an inferior position, and you have no idea it’s happening YEAR AFTER YEAR.
Have you looked at self-insuring your business through captives?
In the captive market, most of these hassles go away. Captive markets don’t care about what’s happening in the traditional market. You take on risk by having more robust safety programs in your business to alleviate the number of claims you receive, but you’re also in charge of your renewal premiums.
The better you manage your risk and claims, the better you’ll do on your renewal. There’s no mystery on whether you’ll see an increase in premiums.
Sounds too good to be true, right? Well, captive insurance isn’t for every business.
You must read our article on the differences between captive and traditional insurance to help you decide which market best fits your business.
You need to also look at the pros and cons of captive insurance before deciding if it’s the right fit for your business. Again, captive insurance is not for everybody.
If you need more information, schedule a call with an expert at ReNu Insurance Group. Talking to people who understand captives and traditional insurance can provide better answers than what you search for on Google.
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