Tips to Reduce Insurance Expense
November 01, 2024
by a searcher from Duke University in Tulsa, OK, USA
Insurance is by far the largest indirect expense for the business I acquired. I am approaching my first renewal and I want to explore ways to reduce this cost. If anyone has best practices or resources to reduce the expense associated with property, general liability, worker's comp insurance etcetera I would be thrilled to learn.
from University of Central Florida in Ormond Beach, FL, USA
1. Strong Renewal process - Your agent needs to have a strong renewal process. A good agent begins collecting information and shopping 120 days in advance. A lazy agent starts about 30 days prior to the effective date. The insurance world moves very slow, so it’s important to get a head start, so you don’t receive a last-minute increase.
2. Market Summary – Each year your agent should meet with you via video meeting or in person and the proposal should include a full list of all the carriers they quoted and the outcome. If you don’t see this, your agent is most likely just presenting your incumbent and not actually shopping. Side note, if you have an increase and you still don’t see a market summary – run!
3. Carrier Access - Make sure the brokerage you’re using is large enough to have access to all the carriers. A lot of smaller agencies may be missing key carrier contracts.
4. Specialist - I’d recommend trying to find specialist vs a generalist. This is a relationship business, and the specialists develop better carrier relationships which allows them to provide better deals. Ask your agent what other similar companies they represent.
5. Avoid dec sheet brokers – these are agents who don’t fully understand the coverages and only understand the numbers. These types of agents are dangerous. If seen uncovered claims, large audits, and many other issues. Also, look out for new agents – I’d shoot for someone with over 5 years’ experience minimum. Professional designations like the CIC or CPCU are also a good sign showing that the agent really put in time to learn the coverages.
6. Workers’ Compensation / Experience Mod – Your agent needs to full understand workers’ compensation and review your experience mod with you each and every year. This is key. You can control this cost with a few simple tips.
7. Drug Free - Consider making your company a drug free workplace. A large percentage of workplace injuries are a result of employees under the influence. If you have a drug free workplace you can drug test after the accident, and this can be helpful in potentially fighting a workers’ compensation claim -although WC is always in the employees favor (this is one of your only tools).
8. Response Time – Do you have your agents cell phone number? Do they respond quickly to emails / calls. This is very important. Some agents build massive books and customer service goes out the window. You want an agent that is successful, but not overwhelmed and its very challenging to find. Do they give you updates as you approach your effective date?
9. Shopping – If you’re unhappy with your agent you can always shop the insurance. Keep in mind most carriers are first come first serve. If agent A goes to nationwide, agent B will be blocked at that carrier if they try to obtain a quote. So, the agents end up shot gunning the marketplace and this has a negative effect for clients because it doesn’t allow the competitive process to take place.
10. Market trends – Sometimes an agent can do everything correctly and they cannot control the marketplace. Its important that they keep you in the loop and prepare you in advance for this outcome. For example, in my market (Florida), automobile/property insurance has been skyrocketing over the past 5 years. There’s also a very small pool of carriers. I’m unsure about the specifics in your area, but the agent should be communicating this to you prior to your renewals, so you can prepare.
11. All Carriers aren’t created equal – Some carriers have very strong claims handling and others do not. The agent should give you a list of positives/negatives of the carriers he presents to you.
in Montreal, QC, Canada
It's a medium term-project and you need PM skills + 1-2 people on a consulting basis so you don't have to do everything yourself. It doesn't have to be expensive but real changes are affected over 2-3 year period slowly and methodically.
Here's outline of an iterative process:
1. Have policies read by someone who has experience reading policies (ex-broker, consulting broker, risk manager, etc). You can start with property as that might be easier conceptually;
2. For Each policy, itemize coverages (read both declarations and the policy wording as line items group many things);
3. Brainstorm operational risks and create a list;
4. Create a matrix that maps coverage list to operational risks (#2 & #3).
5. Use the matrix to identify your needs and document the gaps in coverage (a guess at first);
6. At first renewal cycle, ask your broker to provide recommendations of coverage for your company for the renewal (ask them if there's any coverage you aren't buying). Try to map it to your work on your end. You will get a good read on your broker's abilities by being more informed about what you need.
7. (Optional) Prep your experience to go to market second year...at minimum have a gameplan for this with broker.
The idea is to iterate this cycle, learn and use it to drive results by understanding the following:
1. Pricing Drivers;
2. Risk Drivers;
3. Carrier stability and effectiveness;
The second is most underlooked and misunderstood but can have the biggest tangible impact long-term.
Once you get #2 improved with time, #3 is nuanced but i'd want to pay higher premiums for the better carrier or partner (presumably you'll have a strong handle at that point over where to spend your budget).
Happy to bla bla more, fun subject.