The insurance industry encountered a number of challenges last year. According to estimates from Swiss Re Ltd, natural catastrophes and man-made disasters in 2011 cost insurers $108 billion, making it the second most-expensive year on record. In addition, the sluggish economy has made it difficult for the property and casualty industry to realize the investment returns of the past. Premium dollars have gone down while claims have generally trended up.
For the first time in a half decade, premium rates for property, liability and workers' compensation insurance have begun to increase as of late last year. "We're moving into a seller's market," said Ken Schreiber, Chief Sales Officer of HUB International Northeast. "Buyers must be more aggressive to protect their own interests and their insurance brokers must be more proactive in helping them secure coverage," he said.
In a seller's market--known as a 'hard market' in insurance industry parlance--the top concerns facing clients are increased prices and decreased availability of coverage, especially for buyers with large natural catastrophe and supply chain exposures.
How should you position your company for changing market conditions?
"The most important thing our clients can do today is be proactive," Ken said. "Don't wait for insurers to come in with price increases. Work with your HUB broker to prepare a presentation on why you're a good risk and get it in front of your insurance carrier at least 90 days in advance of your renewal."
Insurers are becoming more laser-focused on avoiding unprofitable risks even if that means a reduction in their overall sales volume. For this reason, businesses need to pay more attention to workplace safety.
"Workplace safety is a key factor for underwriters and an important investment that businesses have to make," said Matt Coleman, President, HUB Colorado. "There will be less room to shop on price, and safety programs can make a difference in your premium rates," he said. For example, if an insurance carrier is raising rates on average by two to three percent, it might impose a seven percent hike on a company that has had a lot of claims, while a company with an excellent safety record will be offered a much lower rate.
Making the most of a strong buying position depends on being prepared when you sit down to negotiate coverage. Your HUB broker will guide you through this process. Here are some steps to consider:
- Begin your policy renewal process early - Start discussions with your HUB broker at least 90 to 120 days in advance to maximize your options.
- Prepare accurate and current information - Your business may be in a different position than it was when you last met with your broker and those changes could impact pricing, marketing strategy and coverage.
- Collect detailed data on losses - Review your losses and claims over the past five years. You may find that some claims from the past can be closed out, creating a more favorable picture of your risk in the marketplace.
Reviewing your history also enables you to set up loss control and safety measures that will make you a better risk in the eyes of underwriters. Talk to your HUB broker and to a member of the HUB Risk Services team to learn how a gap analysis can provide valuable underwriting information to control risk and reduce losses.
Todd Macumber, President of Risk Services for HUB International, offers these recommendations to help you shape up your safety program:
- Understand and address key exposures - Poor ergonomic design, slip and falls, inadequate machinery safeguarding, or lack of proper personal protective equipment could be significant drivers of workers' compensation costs, if not addressed. Review these and other aspects of operations to prevent frequent and high severity losses.
- Learn what you don't know - Develop internal resources or hire a safety professional to help you identify potential risks and ensure that you are in compliance with OSHA requirements.
- Design safety into your business - Focus on redesigning processes to remove hazards where possible. Putting the proper controls in place during the design phase is often less expensive than retrofitting equipment or paying for a loss later.
Businesses that manage their risks well will be better able to navigate a difficult pricing environment as it emerges. Take the time to gather information about the current state of your business and understand your own risk profile before you renew your insurance coverage. Make sure you have an insurance professional at your side who understands your company and your industry.