As insurance renews, businesses across the country are pinching pennies. Should I increase deductibles, eliminate vehicles, change carriers, reduce liability coverage, or find some other way to shave premiums, business owners wonder?
Part of the equation when businesses shop coverage is the solvency rating of the proposed insurance carrier. But most risk managers consider something just as important—how does this carrier handle the claims process? Paying too much on claims or paying disputed claims as a “cost of defense” maneuver ultimately drives your premiums and your attractiveness to other insurance carriers should you shop coverage. Underpaying claims such as business interruption losses or first-party property losses can be detrimental to your business, as well.
Let’s face it, we buy insurance to pay claims, if we have them. And in claims handling, some carriers excel, while others, quite honestly, fail miserably. How does the average business owner, when faced with two or more insurance quotes of roughly equal cost, choose the carrier? The reputation of the company in the claims arena should play a major role in the decision, perhaps an even bigger role than cost, especially when the cost difference is minimal.
“I work with our broker to place coverage with the biggest and the best insurers in the world, and I have long been concerned with claims service as one of the several measures to base placement decisions on,” one
This is a great approach, but if you are the average buyer who doesn’t go to sleep at night reading National Underwriter, this won’t work for you. A simpler method is to rely on your agent or broker, who should have previous claims experience with the proposed carrier. Brokers should be forthright regarding their experiences. Unfortunately, in an effort to shave costs, many brokers are eliminating a most important role in their agencies—their claim liaisons who, in the past, would have pushed the carrier to appropriately manage claims on behalf of the policyholder. (No one ever accused the insurance industry of being anything but pennywise and pound foolish, at least not in the past decade.)
If your brokerage either doesn’t offer that service or has eliminated the position, it becomes even more important for insurance managers to ferret out the information themselves, then educate their bosses and board so that the decision does not come down to simple dollars and cents.
When you have a claim, you will quickly discover how good your insurance carrier really is. With any luck, you will never have to find out.