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What your insurer wants (and why it matters)

17/01/2013

What your insurer wants. Risk, management, losses, safeguard, protection, liability, accident, policy, investment.

We know what you're thinking:

"Why should I care what insurers want? It's got nothing to do with me. They've got my money, isn't that enough?"

That's certainly one way of looking at it. It's difficult to raise much interest in an industry with one of the least positive reputations going.

But what insurers want has a bearing on your insurance. It affects what cover you get and how much you pay for it. Knowing what they're after gives you the inside track and helps get you the right insurance at the right price.

Here's why.

Profit from loss

Insurers are in business to make money. In that respect, they're no different to you or us or any other business.

And because they're in business to make money, they have to be realistic about the type of insurance they sell and who buys it.

For example, an insurer that covers expensive things, or things frequently claimed for, has to be careful. If not, it could end up paying out more than it can realistically get back in premium. It wouldn't take long for it to run out of money – and the FCA (Financial Conduct Authority) really doesn't like that.

Every insurer has to constantly evaluate the type of insurance it offers, the type of things it insures and the type of businesses and people it's happy covering.

In its most basic form, this evaluation process is what the insurance industry calls 'underwriting'.

Two-way street

'Underwriting' determines what cover you get and how much it costs. It's why we ask you those questions about your business when you get a quote.

In return for a premium, the insurer takes on the risks your business faces. If something goes wrong and you're sued, this contract of 'risk transfer' means it'll pay legal costs and damages and you won't.

But for this to happen, it wants an idea of the kind of work you do; for whom and how much it's worth. That's all it's got to go on. It doesn't know you. It can't say you're a trustworthy, conscientious and diligent individual and therefore worth insuring.

So insurers want you to tell them what they want to hear. They want reassurance. They want to know that covering you isn't going to bankrupt them. They want you to demonstrate risk awareness. They want you to be professional.

What's in it for you?

If you can tell them what they want to hear, they'll want to help you if and when something unexpected happens. It's no exaggeration to say it could save your business.

Contrary to what you might think, insurers are not always the bad guys. They work hard to investigate and understand your risks, and put together policy wordings to mitigate them.

You might not believe it but they are on your side. After all, keeping your business safe is in both your interests. You have more in common than you think.

Who'd have thought?

Image used under license from Shutterstock.

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