The insurance market is changing… what can you do about it?
The insurance market operates in a similar way to many other marketplaces, in that it uses simple supply and demand principles. When there is an over-supply of product (too many insurance companies), prices are driven down; when supply is reduced or demand increases, prices rise.
In these current times, The Insurance Market is going through a change in supply/demand. Supply has reduced, with Insurers pulling back from and, in some cases, out of, certain insurance products. Factors that may have contributed to this are structural disasters in recent years, like the Grenfell Tower tragedy, for example, or other obvious factors, such as COVID-19. These have changed the way that insurers calculate how big risks may be.
In reality, the insurance market has been under-priced due to excessive competition for the last 15 years, but that is now changing. The choice of insurers is reducing and pricing is increasing.
Insurer Risk Appetite and Pricing
Our insurance partners tell us a “good risk” can expect to pay between 10-20% more, in the current climate, but a business with poor risk features, or poor claims experience, can expect to pay a great deal more.
Larger risks that require more than one insurer to cover their risk exposures face further challenges, as insurers look to reduce their risk exposures.
Some occupations, for instance, architects, are facing eye-watering increases to Professional Indemnity costs (again, due to Grenfell).
So what can you do about this?
– Make sure you demonstrate the quality of your Risk Management, i.e. that you are a good risk!
– Make sure you talk to your Insurance Broker and share all pertinent information with them!
What is a good risk?
A good risk will, in part, be defined by how well the business manages its risk. Insurance and Risk Management are bedfellows when it comes to this. Risk Management allows you to reduce the likelihood or consequence of risk.
Possible ways to be seen as a good risk:
– Put in place a “Testable” Business Continuity Plan
– Create a Health & Safety management system
– Start making Training Records – to prove to insurers the right training is taking place
– Implement a Risk Performance Metric – potentially an online system, to track the company’s risks