Shopping Insurance

Do your business insurance rates go up every year? If you don’t know, then take a look at what you were paying the past 2 or 3 years and what kind of coverage you received. Here I am speaking primarily of business casualty insurance, but the same concept applies to group health, life, and short and long-term disability insurance.

Renewal Is So Routine

If you are like many companies, you have used the same agency for many years to obtain auto insurance, workers compensation, general liability, property, and product liability insurance. Of course, many businesses do not need product liability insurance, but it falls in the same general category of business insurance. If it is true that you have used the same agency for years, you may have fallen into the routine of merely answering a few questions each year and then getting the quote for the upcoming year. Likely there was a small or moderate increase in rates. Unless there is an astronomical increase in rates, you probably just signed the necessary forms and started making payments.

But Wait a Minute!

Over time, small increases amount to big money. Have you ever asked your agency if they are really shopping insurance for your company? If you have and they tell you it won’t make any difference, tell them to do it anyway. In fact, if you are told it won’t make any difference in your rates, you might want to consider contacting another agency.  Why? – Because business casualty insurance premiums can vary dramatically, and a good agent knows that and also how to present your situation in the best light. In fact, when it comes to rate variations, these change insurance company by insurance company, so that one year you may do better with company A, the next year with company B, and the year after that with company A again. Companies change rates based on a number of things, some of these being claims experience, industry exposure, and competitive environment.

Three Examples

CASE 1 – I once worked for a start-up U.S. operation of a Swedish based company. There was concern that our company would have to be classified as the manufacturer of the product, thus necessitating the need for product liability insurance. However, I contacted an agency I knew to be both highly knowledgeable and creative when it came to getting favorable quotes. As it turned out, they were able to convince the insurer that we should be classified as merely the U.S. distributor. As a result we did not need product liability insurance – a significant savings.

CASE 2 – A former client had seen his rates rise significantly over the years. In particular, his workers compensation rates had skyrocketed and he also was unable to purchase product liability insurance. The lack of product liability insurance was a significant exposure because he was involved in an industry selling to high risk customers. He insisted there was no need to be shopping insurance as the agent he had used for years was getting him the best deal possible. I got permission to contact another agency I knew well. The new agency was able to reduce annual business casualty insurance premiums by about $8,000 or 25%, and this included the addition of product liability insurance. So, the bottom line is that by shopping insurance the company added a critical coverage and reduced premiums.

CASE 3 – I worked closely with the insurance agency for a client company to carefully review the classification of employees for workers compensation insurance purposes. This resulted in placing a number of employees in lower rate classification and thus reducing insurance premiums.

You Have Nothing to Lose

Oh sure, we all value those long-standing relationships we have in business. But if your insurance agency balks at shopping insurance for your company, you just might want to reconsider if this is a relationship truly built on trust or is it just habit?

What do you think? Could your company’s insurance need a checkup? Are you throwing money away? If you have a CFO, Controller, or Part-time CFO or Controller, they should be making this an integral part of their duties.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

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