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LETS GET DOWN TO BUSINESS.

Question :
I have been taking all of the advice around getting lean with my costs, communicating with my team, and staying positive – one area that I have not looked at it are my insurances – the costs and also the coverage – what insights or guidance can you give me and other businesses about what to do with my insurance premiums right now? Thank you.

Question submitted 09/04/20 @ 06:22am
Industry: COVID-19 Funding & Support
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  • Right now busineeses should be thinking about all areas of their cost base; insurance is no exception.

    As with others areas of cost management your approach should be to eliminate-reduce-defer.

    If you arrange your insurance through a broker, they should be your starting point . They can help you are to look for an alternative, more competitively priced provider, can help you to evaluate whether you have any cover that is no longe needed and can also advise on areas where you might save on your premium (typically at the expense of coverage).

    Even if you don’t have a broker, periodically looking to ‘re-shop’ your insurance (asking a range of insurance companies to quote for your renewal) is good business practice and, even if decide to stick with your current insurer, gives you a sense of how competitively priced they are.

    When you think you have the right provider(s), then think about coverage. Ask yourself:
    – are there any assets that no longer need insurance, or reduced cover (at least in the medium term). Vehicle that you intend to park-up?
    – are there any risks that won’t be needed in the short term e.g. travel insurance or reduced cover e.g. due to a reduced workforce? If part way through the policy, look for refund.
    – could you live with a higher deductible for some or all of your key risks?

    Reducing coverage and increasing deductibles can result in a significant reduction in premium.

    One caveat here – but mindful of mandatory coverage levels. If you are insurance covers property that is subject to mortgage the lender will have minimum coverage requirements. Similarly with vehicles subject to finance. Also, you have obligations in contracts with clients and other third parties that require you to maintain certain levels of over?

    Lastly, look to defer premium payments as much as possible. Typically paid your annual premium upfront; switch to quarterly/six monthly.

    Hi Andy

    Insurance costs and Policy coverage is something all households and Business Owners will be looking at either now or when their Insurance Polices are due for renewal.
    The first thing we advise is to avoid under insurance in order to save insurance premiums.
    Focusing on Business Owners I offer the following advice:

    If your business is already having cash flow issues and is unlikely to improve in the short term, talk to your Insurance Broker now. There may be policies where sums insured can be reduced, such as Business Interruption and Liability Policies especially if you have only recently renewed these polices.

    With your impending renewal cycle of your Insurance program, be proactive and contact your Insurance Broker prior to 60 Days of your Insurance renewal date.

    Discuss with your Broker a strategy on your required policy coverage for the year and premium payment options. Things to consider during these conversations:
    Has your business risk changed? How long will my business be affected?

    Your Insurance Broker will help you review your insurance policies to reflect any major changes in your business operations, for example:
    Public Liability – premiums are based on employee numbers and annual turnover so if these will be significantly reduced, there should be scope to reduce the premium.

    Directors and Officers Liability – DO NOT cancel this policy. There will most likely be an increase in Directors and Officers, Employment disputes and Health and Safety claims.

    Annual Travel – may not be required for the time being unless you have current travel booked and paid for that you genuinely believe will proceed.

    Business Interruption – these premiums are based on future trading projections. Reduced levels of Gross Profit, Revenue or Rents income should be reflected in the premium charge.  
    DO NOT reduce the Indemnity Period below 12 Months and DO NOT cancel this Policy.
    The Gross Profit Sum Insured is adjusted on the actual Gross Profit at next renewal, so if you were over insured you are entitled to a credit to go against next year’s premium.

    Material Damage – premiums can be reduced by taking a voluntary excess (most effective for very high excesses e.g. $10,000). Review stock Sum Insured for the balance of the year.
    DO NOT reduce sums insured on buildings and plant.

    Avoiding Under-insuring – It is important that any insurance review does not result in under-insurance for critical risks particularly in these uncertain times where the threat of burglary, vandalism, theft, looting, fire etc may indeed be elevated. NZ has major natural disaster exposures.

    Premium Payment Solutions
    There are a few Payment options available:
    Option 1. Pay over 80 days (from the effective date) by instalment this will be interest free.
    Option 2. Your Broker should be able to offer a Premium funding option, (via a funding company) normally over 10 Months from the effective date of Insurance. Discuss this at your renewal meeting.

    Garry Mooney ANZIIF (Fellow) ARM FIBANZ CIP, ICEHOUSE OMP 25
    garry@icib.co.nz | http://www.icib.co.nz
    ICIB Limited

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