Conducting an Annual Coverage Review for Business Clients

A lot can change in a year. For your business clients, a new year may bring business growth along with new risk exposures. Even if policyholders seem happy, their current coverage may be failing to meet new needs. Brokers can provide value by conducting a thorough annual coverage review to ensure business clients still have adequate coverage.

1. Look for Coverage Gaps

Most business owners aren’t insurance experts. In fact, they may have many misconceptions about their insurance coverage. For example, they might think their property insurance will cover flood damage, when, in fact, it excludes this. As a result, they won’t try to obtain flood insurance – until a loss occurs and they realize they don’t have coverage. Regular reviews help business owners recognize coverage gaps and decide whether they want to secure additional coverage.

2. See Whether Consolidation Is Possible

Rising insurance prices have become a burden for many business owners. Although brokers can’t shield their clients from all premium increases, they may be able to help clients save money by consolidating coverage. In addition to reducing coverage overlaps, this may make the client eligible for discounts. As a bonus, coverage consolidation simplifies the claims process when a loss occurs.

3. Determine Whether Higher Limits Are Desirable

Businesses typically need to raise their insurance limits to keep up with growth. Recently, high inflation rates mean businesses may need to increase their limits even more often than normal.

Although this seems simple, there’s a lot to consider. Both property and liability limits may require adjustment. You also should consider whether any sublimits within a policy are too low – even if the main policy limit is high enough, low sublimits may mean policyholders don’t have the coverage they need when a claim occurs. Finally, it’s important to assess both aggregate and per-occurrence limits.

4. Assess New Exposures

New exposures may stem from many causes. For example, a business may encounter new exposures as it grows and hires more staff, as this increases the risk of employment-related lawsuits. Businesses that move into new sectors or begin offering new services will also see new risk exposures. For instance, a grocery store that begins offering delivery services will have new auto exposures. Changes in operations (such as the adoption of new AI systems) may also create additional risks. A careful review of operations will help uncover new risks that may require additional insurance.

Risk exposures may also come from external factors. For example, new data privacy laws mean businesses face increasing litigation and regulatory risks. Changes in society, including an increased focus on things like greenwashing and equity, may also lead to new or increased exposures. Brokers can help clients keep up with trends in legislation and litigation to determine whether they need additional coverage.

5. Review Policy Changes

Insurers who decide to renew policies may introduce changes to the coverage. In some cases, these alterations to coverage may be part of widespread changes. For example, Lloyd’s cyber policies that renew after March 2023 are subject to new exclusions for state-backed cyberattacks.

Since policy changes may impact the amount of coverage available or even whether they cover a claim at all, it’s important to review these changes carefully. Brokers can help their clients by pointing out any changes and discussing exactly what’s different. If the coverage is no longer adequate, brokers can help their clients look for supplemental coverage or discuss switching to a different insurer.

6. Consider Alternative Strategies

In some cases, conventional insurance strategies may not be the best option, either because coverage is too expensive to be worthwhile or because the terms are too limited. This may happen suddenly – for example, when an insurer drastically raises rates or cancels coverage – or it may happen gradually, such as when cumulative premium increases and coverage restrictions add up to coverage that is no longer adequate. Business growth and development may also play an important role.

Brokers can help by discussing alternative insurance strategies, such as parametric insurance. Even if you’ve offered these options before, it may be worth doing so again, since your client’s needs may have changed.

Providing Value in a Hard Market

Rising insurance costs make the job of a broker difficult. By meeting with clients to conduct a thorough annual coverage review, you can help them secure the protection they need while demonstrating your value.

Do you need help finding coverage for your clients? Costero offers parametric insurance policies and other creative insurance solutions. Contact us.