Renewing your business insurance for Property (or fire ISR), Public Liability and Professional Indemnity insurance can be a confusing time for many companies.
Often a broker will present a number of alternative insurance arrangements. Each alternative will have a different premium and a different deductible (the cost retained by the company in the event of a claim). Understanding these different arrangements can be confusing with varying retentions, multiple layers of cover and even “inner aggregates” within the different layers of insurance. It is hard to know which are the most cost effective arrangements?
Finity can help compare the “total cost” of the various insurance arrangements to understand the optimal balance between the retained cost up to the deductible and insurance cover.
The total cost of insurance will vary depending on the cost of claims below the deductible, which will change from year to year. Based on an analysis of historical claims experience we are able to model the total cost of insurance for:
- Your current and alternative sets of insurance arrangements.
- Different loss scenarios (average, poor and good) to help understand the variability in the total cost of insurance.
Case study – Review of insurance arrangements
Finity helped a large infrastructure business analyse the total insurance cost for two alternative insurance programs.
The alternative Ontario commercial insurance program has a much lower premium than the existing program, but it has a higher deductible so the
cost of claims retained by our client is higher.
The chart shows that when the claims experience is “average” or “good” then the alternative insurance arrangement will turn out to be the lowest cost option. This means the cost of claims retained by the client plus the new premium will be lower than the cost of the existing arrangements.
However, in those years when the claims experience is “poor” (and there will be those years), then the alternative arrangement is significantly more expensive than the existing program.
By understanding the trade-off between lower premiums and greater uncertainty in their retained costs, this analysis helped our client select an insurance arrangement which suited their specific circumstances and their risk appetite.
Read more about how we can help with your insurance arrangements.
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