1. Imagine insurance isn’t there, and act accordingly

If you implement risk management measures to reduce any potential impact if a loss occurs, it can only help. Adding an armed response alarm system, implementing better stock control measures, and servicing fire extinguishers regularly are all good steps to take. Acting as if you are not insured makes for more risk awareness and encourages risk mitigation processes and measures. Insurers recognise these measures and often discount premiums.

2. Consider going out of business 

Cover these risks adequately and don’t skimp, as your client losing his entire business would be the worst-case scenario. The cost of insuring against a business burning to the ground is generally cheaper than insuring a laptop. 

3. Also consider the true costs of time and replacement value

Expensive equipment can not only be costly to fix or replace, it can also take time for a new part to arrive, which can negatively affect your client’s workflow, and consequently cashflow. Ensure that enough loss of profits cover forms part of a policy.  

Factor in adequate indemnity and realistic time periods, which will be required to get a business back to full operational level.  Make sure the real replacement costs of equipment in present-day value are correct. You can ask insurers for recommendations for who could value your clients’ businesses sufficiently.   

4. Generally, don’t sweat the small stuff 

Items such as cellphones, for example, are costly to insure because they have a high frequency of loss, which essentially pushes up the premium. Depending on the nature of your client’s business, some adjustments may be possible. 

5. Implement thorough internal controls to reduce and manage potential loss.

This should include your client making employees accountable and aware of their responsibility to the company. Stringent stock controls, good vehicle maintenance programs, strong cash management control, sound quality controls and so on.  These control measures will all contribute to good risk management. Businesses with sound controls and good risk management attract better ratings and less punitive measures on their policies.

6. Have higher excesses in place  

This will bring premiums down quite a bit. You may find that keeping a reserve fund to cover an excess, should a claim arise, is a better system for your client. Saving money each month instead of paying a premium for lower excesses can work for many businesses. This will be determined by the financial position of the business and how your client manages internal controls.

7. Make maintenance a priority  

Insurers will often inspect the risk they are taking. Well-maintained assets that may be risks will not incur any additional improvement costs and are well-respected by insurers. Insurance companies seeing this sort of result, will be more reasonable on pricing.

8. Listen to your insurer’s advice on improvements

By making improvements recommended by your insurer, risks will be reduced, and the cost of the policy will decrease.  

9. Focus on your partnership 

As their adviser, you are a partner in your client’s journey, so it’s essential to understand your client’s business, its financials, and what kind of a risk-taker your client is. These are the factors that drive insurance costs up or down. While it's your client’s responsibility to accurately value his business and provide the correct information to you, as their adviser to keep cover consistent and cost-effective, it’s essential to remind your clients to keep values up to date.

Taking these steps can help manage business insurance costs. In the tough economy, the safety net of short-term insurance is important to get right.  

Photo’s by Pixabay and Pexels
Article featured in Businesslive.co.za
About the author: Jurgen Hellweg is Western National Insurance CEO.
This article was paid for by Western National Insurance.