To Protect and Serve

Corporate liability insurance such as general liability, errors and omissions, product liability and directors and officers liability (D&O) often represents large operating costs (see “Are You Covered?”). But protection for your company should not weigh on profits. The following five tips should help you secure policies that offer the best possible prices and terms.

1. Create a climate of competition
Consider using a broker as opposed to a captive insurance agent. Insurance brokers can approach any carrier they feel will provide the best price and terms. An insurance broker is an intermediary between a customer and an insurance company. Brokers work on commission and usually sell commercial, not personal, insurance. A captive agent offers terms from one carrier. Before selecting a broker, create a climate of competition. Request policy quotes from several brokers.

2. Confirm that renewal terms are priced in line with current market conditions.
 Fluctuation in market prices is often ignored by carriers when presenting renewal premiums; they will try to stick to a price that originated in a more expensive market. If you don’t press your broker to adjust the premium price of renewal terms to market levels, you may find yourself paying too much.

3. Make sure your broker is willing to be your company’s advocate during the claims process.

The right broker can save your business substantial money if he is equipped to navigate the claims process successfully. Upon receipt of a claim, the first thing an insurance carrier will do will be to look for a reason not to honor the claim. When a carrier decides the claim does not fall within the policy form parameters, many business owners think this is the end of the story and take a loss. A good broker is a business advocate who will review the rejection of the claim and do his best to validate why the policy should, in fact, cover the claim. If a broker knows his product he can usually have some level of impact on the carrier’s response.

Before hiring a broker, ask directly what his or her capacity is in the claims process. A broker that has been in the trenches, battling attorneys for the insurance carrier on behalf of the client, will be ready to discuss the claims process. Those that tend to drop the ball during this phase of insurance coverage will have little to say. Ask for examples of claim successes.

4. Request additional coverage for little or no extra premium.

Carriers find it easier to offer broader terms than lower premiums. When negotiating terms, don’t hesitate to request additional coverage that the carrier may be willing to include in order to win your business. The additional coverage you could request would depend on the type of liability coverage you need. For commercial general liability you might request coverage for additional structures, transportation or vehicles. Ask your broker what else might be available and advantageous to your business.

Another request that can yield substantial savings is for a reduction of the retentions. Retention is the name used for deductibles in liability coverage. Retentions can be very high, yet many business owners are unaware of them. Ask your broker if it is possible to have them lowered for no extra premium. If the carrier will lower retentions only for an increase in premium, consider the option if you feel that shouldering a large portion of the claim would result in the possibility of insolvency for your business.

5. Do your best to retain continuity with one carrier.

Price and terms should not be the only factors driving the decision to change insurance carriers upon renewal. While doing so might be tempting, the consequences can often be costly. Companies with a low or high claims history can benefit from loyalty to one carrier. Premiums paid on policies with no or few claims can be like money in the bank for a carrier, giving them a little extra incentive to honor claims filed. While carriers don’t have the legal right to provide preferential treatment to clients’ claims based on loyalty, they might be more accommodating to long time, good clients. If you do decide to switch carriers, do your best to confirm that the new policy offers continuity in date and comparable terms to your previous policy.

Request a side-by-side comparison of your current carrier’s terms and the competing terms. Brokers will readily provide this service to win your business, and it will force their hand to press the carrier to improve the competing terms if they are not adequate to justify a switch. Many brokers use software designed to provide a concise term-by-term checklist.