Insurance — Expense, or Investment?

Even after all your risk management time and effort, most firms need insurance to protect the bottom line from unexpected large losses or lawsuits.

Is insurance just a necessary expense?

If you buy transactionally – meaning you buy a new policy when the need arises, and cancel when you think the circumstances have changed, or you change brokers for a slightly lower cost … then the answer to that question is probably, “Yes, … it’s just another #!$%* expense.”

If you buy strategically – meaning you predict and project your needs with a well-reasoned plan, consolidate dates and broker services, consider customer needs, and you take the long view … then the answer is more certainly, “No, … it’s an investment.”

One subcontractor client found that certain pre-agreed insurance “extras” were a definite competitive advantage.  It made his firm easier and quicker to do business with, because he had the key protections in place.  It was a bit more expensive, but worth it.

Is insurance a commodity – just the price matters?

Lots of mid-sized and smaller businesses have difficulty understanding insurance coverage – and brokers often aren’t much help. So, they focus on price.

When they aren’t shown how to distinguish one insurer’s policy wording from another, and why certain wordings cover far more claims, they’ll never know what they don’t have until they have a loss.

Another client learned the hard way when their insurer declared bankruptcy just after a wrongful death claim was served.  Industry insiders knew about that company’s difficulties, yet their broker never advised them to make a change.  It cost a lot of their own money for making an uninformed choice.

Can insurance be a competitive advantage?

The business buyer who recognizes the strategic value of a tailored protection program is also able to make decisions that create a competitive advantage from their insurance investment.

A tailored policy wording – with the right terms and conditions that fit your protection needs can make a huge difference – not only in loss payments, but also in accelerated timing of payments, fewer limitations on full replacement, minimal exclusions for certain types of loss, and on and on.

Understanding your key risks and having a pro-active broker negotiate with underwriters on your behalf, can give you a tailored protection program that responds just the way you need it to in difficult times.

Client success ~

Some clients have had great success updating and refreshing their broker relationships to get knowledgeable, reliable and pro-active service, while improving coverage and even saving money!  Read an example here – Case Study.

How have you benefitted from specially tailored insurance coverage?  Join the conversation here.

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One Comment

  1. Charles Wilson July 11, 2017 at 10:23 pm - Reply

    My friend and prior colleague at Chubb, Corri DiBagno, emailed these comments: “This RiskSmart Tip, for me, was like “preaching to the choir”. As I worked for CHUBB for over 32 years and, as you well know, the company was never the “cheapest” … providing value-added with quality service, i.e. claims, loss control, property valuations, etc., was what I was taught, trained and quite frankly believe.

    Insurance, all to often, is viewed as a price only transaction with little or no regard to terms, conditions and financial strength of the carrier. Sadly, many buyers see it this way and,of course, will pay the piper when the claim happens. Not sure what can be done to alter such perceptions — your most professional advice moves the dialogue, correctly, in that direction.

    Thank you for, Charles, for this most thoughtful RiskSmart Tip….I appreciate reading them.”

    Thanks for your insight Corri!

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