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Insurance Renewal – Sticker Shock?

The term “sticker shock” is well known in the retail sector and refers to the shock or dismay experienced by potential buyers of a particular product when discovering its (increased) price.

Many companies are now very familiar with the concept of “sticker shock” as it applies to the cost of their insurance programs. The hard market, which we should all be well aware of by now, rolls on, and the pain of increased premiums, reduced coverage, and onerous limitations rolls on with it.

One of ABM Risk Partners more enlightened clients recently lamented the hard market. “Why do I keep hearing all the bad news about insurance renewals being blamed on the hard market? When is someone going to start offering a strategy to deal with it?”

It is, of course, THE question that should be asked, and whilst the scope to develop and execute a strategy to reduce the impact of the prevailing market isn’t available to all companies, it is available to many. The strategy is to stop buying insurance and start selling risk. This assumes, of course, your organisation has a robust and mature approach to Risk Management, which many do not.

To paraphrase George Orwell, “not all brokers are created equal”. Many brokers simply don’t understand Risk Management. Those that do recognise the importance of risk culture and risk maturity and engage their clients in “selling” their Risk Management capability to underwriters. If an underwriter has confidence that its clients know and understand their risks, and have confidence in their preventing and mitigating controls, then they are likely to favour those clients with better terms.

One well known global property insurer puts this very well – better to avoid a risk than recover from it. They back up their approach with value adding risk engineering that aims to improve their client’s risk profile. It always surprises me why more companies don’t go with this insurer. Unfortunately, the best laid plans don’t always prevent risks from arising, so it’s fundamental that Risk Management also considers the controls to minimise impacts as and when they do. At ABM, we have always been able to see how this works for property insurance, and it is equally important for other classes of insurance, and notably with the very challenging Cyber Risk, and Directors & Officers policies.

ABM never set out to provide Broker Services Tenders, but we are now providing them to many of our clients who face the same challenges and are in need of support in the process to review, select, and implement broking services. The key factor for all is achieving an alignment between Risk Management and insurance. Having experience as a broker, underwriter, and buyer of large corporate insurance programs, ABM’s partners understand the challenges and can bring real value to their clients in developing and implementing a strategic approach to insurance.

If you’ve experienced sticker shock on your renewal, think about a different approach – stop buying insurance and start selling risk.

If you haven’t experienced sticker shock yet, I guess your renewal is still coming. Good luck.