5 ways to strengthen program administration and prepare for renewals
Here's how risk managers can gear up for more extensive and challenging renewal negotiations with insurance carriers.
As the commercial insurance market continues to harden, many risk managers are gearing up for more extensive and, in some cases, challenging renewal negotiations with their insurance carriers.
Besides dealing with potential requests from carriers for higher rates and more restrictive terms and conditions, risk managers may have to adjust or expand coverages based on facility shutdowns and consolidations, mergers, acquisitions, changes in property values and other factors. What’s more, they may have to do so with less staff or some team members continuing to work remotely due to the impact of the COVID-19 pandemic in certain areas of the world.
As they work to address these circumstances, a key first step may involve revisiting their insurance program administration to make sure they can readily access and analyze all their critical policy information. Here are five ways for risk managers to strengthen and streamline their overall insurance program administration.
1. Consider going digital. If you’re analyzing program structures involving multiple policies, coverages, premiums, terms and conditions on a year-over-year basis or across a period of several years, it’s arduous to pull all the relevant data from paper policies or even electronic files.
Digitizing all of your critical policy information positions you to conduct policy and coverage comparisons, gather and share policy information with specific operations, and disseminate it to key influencers across the enterprise. You may be in a situation where you need to increase your limits for a specific line of coverage, such as cyber insurance, but you face a combination of higher premiums and a reduction in available limits from an incumbent carrier. Given all these dynamics, you’ll need the ability to create robust analytics quickly to assess all the carrier and coverage options available against your needs and budgetary considerations.
2. Carefully assess your risk and insurance trading relationships. Review your relationships with each insurance company and broker on your program. Go back over the years and determine how your incumbent insurers have performed given insurance market conditions at the time. Consider how they responded when you’ve had a significant claim and what your renewals were like the following year, as well as how you fared when you had favorable claims experience vis-à-vis overall insurance market conditions.
While it may be difficult to change carriers or brokers in a tough insurance market, it’s a time when these relationships may be tested, and evaluating the competition may help you weather a generally hard marketplace.
3. Engage management in the renewal process. Given the current economic environment, the challenging insurance market, and the likelihood of organizational budgetary restrictions, it’s imperative for risk managers to keep leadership, operations and finance informed of the status of your program renewals. Whether coverage and program structures need to be adjusted to mitigate against higher rates or greater limits are required to address more complex exposures, management needs to understand what’s happening in the insurance marketplace and its impact on your insurance program.
In some cases, you may need to strike a balance between controlling premium outlays and obtaining the required protection. Leadership and operations managers whose units may be affected by insurance cost allocations should be kept abreast of these developments and whether budgets may need to be adjusted to address coverage requirements under more difficult market conditions. In these situations, using the cloud for 24/7 remote access can help facilitate timely communication, consistent analytics, ready access to program information, collaboration on program development, and other risk management priorities across the enterprise.
4. Own and control your data. Whether it involves loss runs, actual binders and policies, property values, or other exposure information, many risk managers using external resources (e.g., property risk engineering services, third-party administrators, information management providers, brokers) don’t have ready access to their own data. While that may not have surfaced as an issue in the past, when risk managers are contemplating changing carriers or providers, you may not be able to gain access to your own loss and risk data. Any challenges in retrieving, recreating or obtaining that data from external sources can complicate decisions about changing providers and prevent smooth transitions to new insurers and providers.
The takeaways here are: Don’t be reliant on others — take control of your destiny. From an underwriter’s perspective, the quality and accuracy of your data may be a reflection of your risk management organization. Ultimately, when it’s time for renewals, the data you’re able to provide represents your currency and will have a significant impact on your overall insurance program.
5. Know your program history. Go back over several relevant years and analyze all elements of your insurance program, including retentions, limits, terms and conditions. Examine what’s changed and how it impacted your programs in the past, such as the imposition of peril-related sublimits; other coverage restrictions and exclusions; coinsurance requirements; rate actions taken in years following poor loss experience or favorable loss experience; credits provided for investments in security and other loss control measures, etc. This exercise will help you and your broker anticipate how the insurance market may react to any changes in your enterprise’s risk profile, operations and coverage needs.
By taking these measures as far in advance of your scheduled program renewal as practical, you will be in a better position to get the most from your relationship with your broker or agent, as well as to negotiate your program effectively with your insurance carriers.
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