As an executive, you’re probably not an insurance expert; that’s why you have an insurance broker. But there are some things that your insurance broker won’t tell you – things that could be critical to the long-term success of your platform. Here are nine things your broker already knows and you should know, too.
1. Your Broker Can't Get You Access to Every Carrier
You want your broker to find you the best insurance coverage available, but that doesn’t always happen for one simple reason: your broker doesn’t have access to every single carrier. If the best insurance coverage for your platform happens to be from a carrier your broker doesn’t represent, you won’t learn about it.
There are two types of insurance agents or brokers. Captive agents only work for one carrier. They sell insurance products from that carrier but not from any other. Independent agents or brokers, on the other hand, contract with multiple carriers. However, this doesn’t mean they will have access to ALL carriers. Some carriers don’t even work with independent agents. Other carriers do work with independent brokers, but this doesn’t mean they’ll work with YOUR broker. Your broker needs to gain access to the carrier, often by securing a contract – and that isn’t always easy. All of this means that when you pick a broker, you’re gaining access to a limited number of insurance options.
2. Your Broker May Only Have Access to Traditional Insurance
Most insurance brokers focus on the traditional insurance market and not the excess and surplus (E&S) market. In fact, some brokers only work with traditional insurance carriers. If your account is considered high risk, you might not be able to find coverage.
The traditional market, also called the standard market, consists of admitted carriers. These carriers have been licensed by the insurance department in their state. Whereas this may sound like a good thing, these carriers aren’t always willing to cover high-risk accounts. As a result, if you’re only looking at standard carriers, you might find that everyone rejects you.
There is an alternative: the excess and surplus market consists of non-admitted carriers. These carriers have greater flexibility, allowing them to underwrite accounts with more unusual or exposed risks. If you’ve been turned down by the standard market, you need a broker who can provide access to E&S markets – but not all brokers can.
3. Your Broker May Not Have Access to Exclusive Niche Programs Designed for Your Industry
Some brokers are a jack-of-all-trades. They offer some general commercial packages that can be good for the average business; but if your business isn’t exactly average, you may be out of luck.
However, niche insurance programs that cater to specific industries also exist. These programs can be a fantastic fit because they’re designed specifically for the unique risks that businesses like yours face. However, they also tend to be exclusive, meaning not all brokers have access to them. If your broker doesn’t have access, you’ll probably never hear about the programs.
4. Your Broker Can't Help You Launch a Self-Insured Retention Program
Let’s say you can’t find the coverage you want at a price you like through a non-admitted carrier or a specialty niche program. Or you are interested in managing more of your own risk? What’s your next option?
You could try a self-insured retention (SIR) program. In this arrangement, the insured – that’s you – agrees to pay claims below a certain threshold. It’s kind of like a deductible, but, as IRMI explains, a key difference is that the insurer won’t help with the defense for claims below the SIR threshold.
An SIR program can be a great way to take charge of your risks. If you can keep your claims down, you can reap the benefits. However, not all brokers have the expertise needed to help you set up an SIR program – and they probably won’t even mention that it’s a possibility.
5. During Hard Markets, Insurance Can Become Extremely Expensive and Scarce
The insurance market goes through cycles of hard and soft markets. Soft markets are good for policyholders because coverage is easy to access and you can negotiate good rates. Hard markets are bad for policyholders because rates are rising and insurers aren’t as willing to underwrite higher risks.
According to Property Casualty 360, we’ve been in a hard market for a while. Several factors, including inflation and natural catastrophe losses, have shaped the current market.
At some point, the market will change again. In the meantime, finding affordable coverage can be especially challenging and you may need to try alternative methods that your broker might not tell you about.
6. Risk Management is a Long-Term Play
Brokers often focus on the current year. After all, they’re trying to sell you a policy now – they don’t know if you’ll still be their client years later. However, risk management isn’t just about immediate results: it’s a long-term endeavor. The risk management strategies you implement today will impact your losses tomorrow – and that will impact your insurance rates.
When insurers underwrite an account, they look at the applicant’s loss history. Usually, they look at claims going back at least five years. This means that if you have a lot of losses now, it can take years to clean up your loss history and qualify for better rates. The sooner you start, however, the sooner you’ll see results.
7. If You Burn a Market, There May Not Be Another One.
When you’re running a specialized business, there simply might not be a lot of carriers that can provide adequate coverage. If you burn one market, you might not have other options.
Also keep in mind that your claims history follows you. If you have a lot of losses with one carrier, you can’t just switch to another to escape the resulting price hikes. Your broker might not warn you about this, but it’s important information to have.
8. Carriers Want Clients to be Their Partners in Risk Management
Since your broker acts as the middleman, you might not have much interaction with your carrier. As a result, you might forget that you and your insurance carrier share a common goal: you both want to keep losses down.
Carriers can’t achieve this goal on their own: they need their policyholders to play an active role in managing risks.
Be willing to work with your carrier. Show them what you’re doing to manage exposures and when they provide risk management strategies, listen. Remember that they’re trying to avoid losses – and that will help you, too.
9. Everything is Connected
Brokers provide insurance coverage. Some insurers also offer risk management tools and resources and may assist with claims, but they don’t typically get heavily involved in other aspects of your business, such as your screening process. For this reason, they might not point out how deeply connected everything is. Your screening, your insurance underwriting, your claims handling, your risk management – they’re all pieces in the same puzzle. To master risk management and secure the long-term success of your platform, you need to take a holistic approach.
DigiSure caters to the insurance and risk management needs of mobility and shared economy platforms. We can help your company take control of its risks with products focusing on data, screening, insurance, and claims.