How to effectively present your risk to the insurance market

16 January 2017

For many years clients have completed applications to present an overview and describe their risks to insurers. However, you have to question whether a few pages on an application really allows you to best describe your risk and whether it truly represents all the investment you as a business puts into ensuring your risk is being considered by the insurance marketplace in the right way.

If you think about the brand you create with your customers and the reasons why they use your services or purchase your merchandise, this should be similar to how you represent your business to the insurance market. Thus allowing those underwriters that participate on your risk to really understand the benefit of all the measures you take to protect your business as if you were un-insured. 

A good place to start is to question whether the application fairly represents all you are doing in any given aspect of your business. Let’s consider various important areas:

Let’s start with employment procedures. Articulating how you employ your staff, handling of on-going performance management and employee engagement, is a very good measure of the health of a business. When considering the world of valuable goods your people are integral to the overall safety and performance of your business. 

Your third party providers: How do you vet and consider working with third-party providers in particular? Presuming vetting takes place, explaining to the insurers how you do this and the level of checks you would ordinarily carry out when working with a new third-party will give the insurers a huge amount of comfort when considering underwriting your risk. 

Often a third party is responsible for carrying out the transportation of your goods. Along with the terms of contract you have negotiated is usually of particular interest to insurers. Therefore where and when do you incur liability and remove liability? How have you managed to reduce your liability? These are aspects the insurers find incredibly helpful to understand when underwriting your risks. 

A further notable area of influence is the audit procedures you adopt. How do these audits compliment and create a stronger risk for your insurers? What have you been taught and taken note of from your prior audits and what procedures have you adopted in order to create a more robust risk management procedure following these findings? All of this information greatly assists in building your risk profile with insurers. 

It is key to be aware that insurance remains a relationship driven business despite some of the commoditisation we are seeing in the marketplace. There is significant value in spending the time to get to know your insurers as well as other alternative insurers that may operate within the sector. Being a specialty sector the jewellery and fine art market and the specie and cash logistics markets still hold great value in meeting the clients face to face and understanding the journey of the business, as well as many of the unique risks each business creates. Many of these softer aspects are extremely difficult to establish by simply completing an application form. By building your company’s profile in the marketplace allows for greater understanding of the risks to your business, therefore allowing for more suitable insurance language. It also creates choice as a buyer, as the more insurers know and feel comfortable with your risk the more choice and competition you can create within the marketplace. 

One of the benefits of taking this approach is it allows you to specifically and precisely insure your risks, versus simply purchasing an insurance product that you hope will meet your needs in the event of loss. This is significant as insurance language can vary considerably depending on how comfortable insurers feel with the risks. It is very important to approach the insurers with a wording based on the risks you want covered, versus being offered a wording that only partially covers your risks, or one aspect of your risks. This is particularly important with regards to internal procedural breakdown. We have seen many cases where wordings can be contentious should an insured break an internal self-imposed procedure. Within the valuable assets sector many losses are caused and created as a result of procedural breakdown, therefore at the very moment you need your insurance to offer payment. You don’t want to see a clause that removes or restricts coverage due to an internal procedural breach. 

In many cases creating the broadest most appropriate insuring clause which represents the risks within your business is the right place to start.. The broader you’re insuring clause the stronger your policy. Insurers will only usually offer these broad insurance agreements in the event the insured demonstrates many aspects mentioned within this document. 

4 simple rules: 

  • Create a risk management plan around your people, your providers and your physical security
  • Demonstrate and deliver your business and brand to your insurers
  • Build relationships with your insurers as well as alternative insurers within the sector. The more insurers that know your business the more choice you create for yourself
  • Only buy a policy that insures your specific risks, don’t buy a policy off the shelf and hope it works for your specific needs. 

For further information, please contact Barry Vickery, Deputy CEO of Specie Fine Art and Jewellery on +44 20 7528 4598 or email barry_vickery@jltgroup.com

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