Do you know if your business insurance is sufficient? Is it accurate? Is it priced competitively? What would happen in the event of a catastrophic fire or lawsuit? Would you recover?
These are questions that may every once in a while rumble around in the back of your mind as a business owner or CFO and it gives you pause and maybe some worry. In this video and post, I’m going to talk about going through a due diligence process when it comes to your business insurance so that you can objectively answer the questions, worries, and issues on your mind.
Business Insurance renewals come and go – you may get a review from your broker, or you may not. You don’t really understand what’s covered or not in your policies, and you may just be hoping for the best in terms of coverage if a claim ever happens, and maybe every few years you test your agent by shopping the marketplace.
This is the third video and post in a three-part series on how to get the best results on your business insurance
So the typical business insurance renewal process is that a decision maker every few years will go to two or three insurance brokers to get quotes and select the broker with the lowest cost.
I did a video on that process that you can view here: Business Insurance – Why Using One Broker Gets The Best Results
Year after year you get your renewals from your insurance company or broker and they’re stuck in a drawer and forgotten about until the next renewal. That is until there’s a problem or the price goes way up.
This type of renewal situation lacks any process and may be due to the fact that business owners just really hate business insurance, they don’t really understand it, and you have more important things to worry about, so you hope for the best and move on.
Unfortunately, this is a problem that is usually discovered when a claim happens, which is exactly the wrong time to be educated on business insurance.
That claim could be something like a ransomware attack and you find out that Cyber Insurance was never recommended to you.
It could be a fire that destroys your business and you find out that you don’t have sufficient property insurance on your contents, building, or business interruption coverage.
It could be any number of situations from the ordinary slip and fall liability claim, to an employment discrimination or harassment claim, and you only find out when that claim has occurred that you either don’t have enough coverage, or you have no coverage at all and the result will be tens of thousands or hundreds of thousands, or maybe millions of dollars you’ll have to pay out of pocket to be made whole again.
How do you fix that, so it doesn’t happen, without a huge hassle and a lot of extra work for yourself?
In my opinion, the best way to do that is that you go through a due diligence coverage audit which can be done without disrupting your current brokerage relationship, and without the chaos of shopping the marketplace.
What is Due Diligence?
It’s a process of hiring a single broker with the express purpose of having them diligently review all your coverages on a confidential basis and providing you with a report of the good, the bad, and the downright ugly.
That report should also give you that broker’s opinion of your account pricing and what they think could be achieved in a market canvass.
Some brokers will perform a diligence report for a fee, some will do it for free.
When we are hired by a private equity firm or other investor looking at a target company’s insurance program we do charge a fee, but when it is a business owner or CFO looking for expert guidance we typically do not charge a fee as long as the decision maker is open to making a change of broker if we find sufficient evidence that a change is needed.
Here are the advantages of going through a due diligence process:
- You get an expert view of how sufficient your protection program is and what’s needed to improve it. This coverage audit will identify the gaps, the shortfalls, and the overlaps that often occur, without the pressure of a multi-broker shopping exercise when you’re under the gun of an impending renewal date.
- You get an opinion as to the pricing of your account and what other options exist, again without the pressure of shopping around your account.
- You get an honest, objective opinion of where you stand relative to your peer group in terms of coverage sufficiency and you get new ideas that may have never been discussed in the past.
- Finally and most importantly you get peace of mind – this diligence process is going to tell you one of two things – One, you’re in a really good place with your insurance, or two, you’re not and there are several ways to improve it.
Now I understand that business owners often hate insurance – it’s complex, it’s confusing, and it’s expensive – but let’s admit it, your business insurance stands between you and financial disaster if something out of the ordinary happens.
Making sure you’ve got the best coverage you can afford should be high on your priority list and this sort of coverage audit pulls the covers back to see what’s going on under the hood.
Here’s the bottom line
I do a lot of these diligence reviews and coverage audits every year and at least 90% of the time I find serious issues with the policies business owners have.
It could be due to broker complacency, or because a review has never been conducted, or any number of other reasons but there’s absolutely no need for it.
If you want to be certain that you’ve got what you need and you’re paying a reasonable premium for it, then this due diligence process is the right step for you to take.
Want to learn more?
I’d love an opportunity to speak with you and see if we’re a good fit for you and your business.
I promise – no hardcore selling or pushy aggressiveness – just some conversation to see how I can help you.