Lack of robust analysis for stages 1,2,3 leads to inappropriate product design/excessive cover/excessive premiums

Do you have any of the problems below?

Covered by Problem Detail Impacts What we can do
Step VI. The Review Process Should we buy run-off cover? Insurer has offered to buy out our excesses/tail risks • Excessive cover bought (XS/AGGs/limits) • Thorough consideration of likely cash-flows, investment income and balance sheet materiality of self-insurance alternative
Step V. Your Money Where does my money go? Premiums often flow through third parties (i.e. neither the broker nor the insurer) • Who is your actual insurer?
• Did you carry out sufficient AML (Anti-Money Laundering) checks on all of the brokers (retail and wholesale) in the broking chain?
• Clear communication of who your insurer is / what their solvency margin is
• Clear understanding of premium flow
Step IV. Your Best Providers Opaque broker insurer security committee “Black box”/lack of visibility of all published information available • Not knowing actual insurer solvency margin / risk of failure • Access to all published insurer information
• Helps to negotiate with weak insurers
Step III. Your Custom Made Product Off-the-shelf EL (&PL) policies Failure to understand precise meaning of “event” limits • Excessive cover limits bought (per claim) • Thorough decomposition of policy wording into limits per claim, per event and per year
• Leads to split limit policies
Step II. Your Future Insurance Manager does not talk to Asset Manager Failure to understand existing asset volatility usually far exceeds insurable risk volatility • Excessive cover bought (XS/AGGs/limits) • Thorough assessment of existing balance sheet volatility.
• Insurable risks are usually less volatile than previously thought
• Leads to more realistic AGG levels
Step I. Your Past Poor analysis of claims data Failure to understand how predictable large claims are, despite their rarity • Policy excesses too low, hence low competition, for even good risks • Thorough assessment of frequency and severity of historic large claims; typically they are predictable: 1 every N years.
• Leads to more realistic XS levels

Benefit

Lowers your premiums, substantially, safely and strategically

Covered by Problem Detail Impacts What we can do
Stage III: Your Custom Made Product We don’t want to give up our freebies Insurers often add “free cover” items, but they are included in the premium, ie they are not free, and cannot be free due to Solvency II considerations. • Unnecessary extras
• Unncessary cost
• Easy profits for insurers
• Lack of understanding of what makes a good risk under Solvency II
• Design bespoke “core”policies
• Leads to new insurers offering cover
Stage II: Your Future Insurance bought in isolation from rest of balance sheet Lack of consideration of balance sheet/risk financing timeframe • Failure to understand benefits of self-insurance alternative
• Policy excesses too low, hence low competition, for even good risks
• Thorough assessment of insurer profitability, including investment income, on your risks: what would have happened had you self-insured?
• Leads to more realistic XS levels
Stage I: Your Past Unused extensive claims data Long-standing charities have extensive claims data, going back many years/decades • Failure to understand how predictable large claims are, despite their rarity
• Policy excesses too low, hence low competition, for even good risks
• Thorough assessment of frequency and severity of historic large claims; typically they are predictable: 1 every N years.
• Leads to more realistic XS levels

Benefit

Lowers your premiums, substantially, safely and strategically

Covered by Problem Detail Impacts What we can do
Stage III: Your Custom Made Product How can we use ELCI/RTA exemptions? All public bodies exempt from EL & Motor TP cover, but still buy “off-the shelf” policies • Excessive cover limits
• Unnecessary wordings (eg unlimited cover per year)
• Design of bespoke EL & Motor policies
• Leads to new insurers offering cover
Do we need PA/Travel cover? Cover is cheap, but rarely incurs serious losses for public bodies. • Insurers make easy profits
• Brokers make easy commission
• Custom made PA/Travel indemnity solutions
• Fully costed – cheaper than insurance
Advising Academies Advise Academies to buy the old cover they used to have • No consideration of central government alternative • Unbiased advice on all options
It’s a hassle buying multiple policies each year Time consuming renewals and data preparation for multiple classes of business • Excessive overall premium and IPT spend
• Excessive use of scarce council resources, better spent on risk management, not risk transfer
• Custom-made whole-account cover
• Fair premium estimated before broking
• Fully-costed impact assessment
Stage II: Your Future Insurance sold as a “safe bet” Failure to understand that insurers do fail and no FSCS compensation for public bodies • Possible excessive risk for public funds / lack of understanding of real probability of insurer failure
• No consideration of maximising self-insurance to minimise insurer failure risk
• Thorough assessment of self-insurance alternatives
• Leads to more sophisticated insurance buying solutions
Stage I: Your Past How much money have insurers made from us? Failure to calculate insurer profitability, including investment income, on your risks • Failure to understand benefits of self-insurance alternative
• Policy excesses too low, hence low competition, for even good risks
• Thorough assessment of insurer profitability, including investment income, on your risks: what would have happened had you self-insured?
• Leads to more realistic XS levels

Benefit

Lowers your premiums, substantially, safely and strategically

Covered by Problem Detail Impacts What we can do
Stage III: Your Custom Made Product No premium visibility before broking Premiums usually substantial, but no decision range in advance of broking • Limited room for negotiation
• Lack of time to investigate alternatives
• Fair premium range before broking
Stage II: Your Future Risk inconsistency Have off-shore captive for customers’ extended warranty risks (i.e. a risk taker), but low XS EL/Motor cover etc. • XS/AGGS too low • Thorough assessment of all existing insurance exposures
• Leads to more sophisticated insurance buying solutions
Stage I: Your Past Historic insurance cover often missing Lost policy documents • Increased balance sheet provisions • Insurance archaeology to find old policies
• Reduced balance sheet provisions
• Frees up funds for future risk taking

Benefit

Lowers your premiums, substantially, safely and strategically

“Ask John to perform his version of search and destroy on your premiums”

“Ask John to perform his version of search and destroy on your premiums”