The greater the risk you need to insure against, the higher your insurance premium is likely to be. For example, insuring a property built on a flood plain compared to an area which is at low risk to flooding.
Manging the risks your business faces is therefore key to getting lower premiums, the three steps involved in managing the risks are Risk Identification, Risk Analysis and Risk Control. Risk management is important as it reduces the potential for loss by identifying and managing hazards, for example, climate change is putting more commercial policies at a higher risk due to the unpredictability and the regularity of these extreme weather events.
Risk identification involves discovering the threats that may already exist, and the potential threats that may exist in the future. For example, identifying risks that the business is located in an area with a high crime rating. The next stage is Risk Analysis where a business would evaluate or analyse how likely the event could happen and if so what affect would it have on the business, such as, business interruption or loss of income. Finally, risk control involves installing a plan to control, reduce or even eliminate the risk. For example, improving security with additional locks, closed circuit television cameras or alarms.
Businesses can also take time to draw up a business continuity plan, setting out how your business will continue in the event of a major incident. Having a plan in place informs the insurer that you have identified, analysed and are ready to control your threats as a business. The benefits of this include, it can help you maintain critical business functions following an incident and insurance companies see you as less of a risk to themselves.
Developing a good risk culture at a business is another method to improving risk awareness and managing risk. This can be achieved by educating employees or clients on how to avoid or reduce risks within their industry via internal training sessions. Also, business could set up a health and safety management system to help you meet health, safety and environmental requirements to improve your health and safety require. Having a strong health and safety record can really help you reduce your premiums as it gives insurers confidence in your business to carry out your methods of risk management.
A simple but effective method to minimise risks occurring is to track your incidents as well as your claims. For example, if you are a retailer with a shop in the local high street with many customers every day and multiple people slip in the entranceway to your shop but only one person decides to sue you. Only documenting that one claim would lead you to believe it was an isolated incident. However, by reporting every incident that occurs in that entranceway it is easy to identify there is a problem. Therefore, by implementing a preventative control, such as a non-slip mat, would keep accidents from occurring in the first place. This would lead to less claims and means the insurer will have no reason to raise your premium.