In the sometimes challenging economic environment, accounting for every cost is vital for many South African business owners. According to John Kerby, Corporate Accounts Director of Risk Benefit Solutions (RBS), an independent insurance and risk specialist, insurance policies are often one of the costs that businesses look to cut due to the incorrect view that insurance may not be a vital cost necessary for the business to operate.
He says that not only is this view incorrect, but very risky, as should something happen to the business, it is not likely that business will have excess funds available to cover these unexpected costs, and that this has in the past led to financial ruin for many businesses.
He adds however that often business owners may unknowingly be paying more for their insurance policies than necessary, and while it isn’t possible to do away with insurance costs altogether, given the protection and risk cover they provide for the unknown, there are smarter ways of getting value for money.
In light of savings month, Kerby offers businesses a number of suggestions that will assist a business in ensuring that the insurance premium they are paying provides the business with value for money, thereby ensuring that it is not paying more than you should be for the necessary cover.
Organisation is key
Ensuring that the business has a dedicated insurance file which includes all the policy information is the first step in reducing insurance premiums. Reducing a business's insurance premiums is a continual process and reviewing the policies regularly can yield savings. This review can be conducted annually, or whenever there is a significant change within the business that may warrant a review.
Assess the business's assets and named employees on policies
Analysis of the business's listed assets, equipment and motor vehicles is crucial to ensure that the business still owns the assets listed, and if not these assets should be removed from the policy. Businesses should also update and reduce the retail values of the vehicles as often as possible, which will ensure the premiums remain both accurate and competitive. The same can apply for the valuations of business' premises.
Businesses should also review all named drivers and/or key employees identified on policies to confirm that these people are still employed by the business. Many employers simply fail to adjust their listed insured employees when individuals leave the company, which can result in significant savings given that the risk will be lowered.
Look for irrelevant or repetitive coverage
As a business evolves some types of cover may no longer be necessary. For example, if a portion of a business closes, an operational change takes place, or a division is outsourced, a business may carry coverage that actually could be eliminated.
Discuss your premiums
Often businesses don't take the step of advising their insurer that they would like to apply for a better rate. Frequently, insurers will discuss the premium in detail and will suggest ways to have it reduced. During this discussion, an insurer or broker is also likely to learn something new about the business that may result in lower premiums given that they understand the risk profile more accurately.
A business may also be eligible for discounts on their insurance if the property has fire alarms, Automatic Sprinkler Inspection Bureau (ASIB) approved sprinkler systems installed or burglar alarm systems. For commercial motor insurance, anti-theft devices and employees with good driving records may also reduce premiums. The business's broker will be able to determine whether the business is eligible for these discounts.
Connect with trade associations
Many trade associations have affiliate members that are insurance companies, and often offer substantial business insurance discounts. Memberships to such organisations are often very reasonable, and can lead to increased business through networking too.
Make sure the business has a sound risk management policy in place, as this will ensure that the premiums remain sustainably low in the long term. The business's claims history has a direct correlation to the premium, so it is important that the claims remain low. Spending more on security, such as cameras, security gates, alarm systems, could also assist with this. In addition, if the premises are prone to flooding, businesses may choose to relocate or take proactive measures to resolve.
Many businesses are either under or over-insured, and it is therefore important for business owners to ensure that they have sufficient insurance cover in place, but at a cost-effective premium in relation to the risk. Talking to an insurance broker can help clarify what type of cover is needed for the business in question, and also highlight issues which may otherwise have been overlooked.
Manage risk effectively
A business should request various options to increase the excess on the company’s vehicles, and business policy. By doing so, a business can weigh up the perceived increased risk verses the reduction in premium. For example, an increased excess per vehicle could be requested depending on how frequently the vehicle is being driven and who the driver of the vehicle is - this is one such smart way of managing the business's risk effectively.