Once we have built solid foundations, we can then consider using insurance….
Your Custom Made Product
Meticulous product design is key to optimising premium spend, but is rarely done by Insurance Buyers.
Many clients simply accept the policies offered by insurers, which have the typical following implications:
- XS & AGGs have limited impact on premiums
- Many clients expect large premium reductions if they increase their excesses
- When we read the policy coverage, we see that insurers are right not to reduce the premiums by much.
- We have extensive experience of educating clients on how to achieve premium reductions, safely and strategically.
- Cover limits are often excessive
- We often see EL/PL cover limits of as much as £100m per occurrence in the public sector.
- Since 99.999% of occurrences only give rise to a single claim (eg a slip/trip claim), you have £100m coverage x 100s of potential claims. You only need this level of cover for perhaps 1 or 2 individual claims.
- It is the cover limits which drive the premiums, not the XS/AGGS
- We have years of experience of designing bespoke “split limit” policies, whilst remaining ELCI/RTA compliant, if needed.
Your Best Provider
If you have a bespoke product design, optimal to you, it is often assumed that, the larger the broker (and insurer), the more experience they have in that bespoke product. However, the key points which are often missed are:
- There are numerous small specialist brokers, more than 250 at Lloyd’s alone
- Specialist brokers rarely respond to blanket, off-the-shelf tenders, but only to bespoke approaches.
- We can design bespoke broker tenders to attract new brokers to your risk, consistent with your procurement rules.
- Insurance companies are not “too big to fail”
- Insurance companies have failed in the past (MMI, Independent) and continue to fail (LAMP, Elite).
- Many clients assume that this is not possible – it is, there is no guarantee of insurer solvency.
- We have years of experience educating clients that insurance is not a risk-free form of risk transfer.
- In particular, public sector clients have no access to the FSCS compensation scheme in event of insurer failure.
- This is rarely factored into insurance decision-making.
- Insurance is about the future, not the past
- In most cases, clients focus on presenting their past claims data in attractive ways.
- Whilst this is needed, it is only a small fraction of what is actually need to assess the risk to the insurer’s balance sheet of accepting your risk.
- We have educated clients extensively on the impact of Solvency II for Insurance Buyers – focus on the future, not the past.
Where does your money go?
- Many clients are asked to pay premiums to a third party (ie neither the broker nor the insurer)
- The receiver is usually a wholesale broker, for whom the client has not carried out any AML (anti-money laundering) checks
- You should never pay money (especially public money) to a third party you have not carried out AML checks for
- We have identifed these AML issues regularly for public sector insurance placement
Your Review Process
How do you know that you made the right decision?
- At the next renewal, many clients simply ask for policy to be renewed “as existing”
- We have educated clients extensively on what MI is needed to review the previous year’s decision
We asses all of the above as standard in our Full Heathcheck, which covers an overview of your current state, and implications for the insurance premiums you are paying and consequent implementation recommendations, in the following areas.
- Your CustomMade Product: Optimal XS/AGGS/cover limits; premium range before broking, robust LTA wordings, compensation scheme access, Solvency-II friendly risk marketing, sales taxes
- Your Best Provider: insurer profit margin analysis, solvency II capital coverage, freebies, premium negotiation evidence
- Your Money: AML checks, contract certainty, claimant security
- Your Review Process: Decision review, emerging solvency II strains, new products, premium rates and trends
Note that a Healthcheck only covers an overview of your current state.
Any Implementation recommendations for improvements, are covered in an Implementation Plan